The European Union Agency for Law Enforcement Cooperation (Europol) has raised alarms over the potential misuse of crypto mining and layer-2 blockchain technologies by criminals. This could present challenges for law enforcement in tracking illicit funds and recovering stolen assets.

Crypto Mining: A Tool for Money Laundering?

Europol’s report outlines how criminals are using crypto mining operations to conceal the origins of their illegal profits, enabling money laundering and additional illicit gains. Suspicious activities have been observed in mining pools, including their exploitation by ransomware operators and scammers.

Layer-2 Solutions: Impeding Law Enforcement Efforts

While touted for enhancing scalability and lowering transaction costs, Europol views layer-2 blockchain solutions as a potential hindrance to law enforcement. These technologies, such as zero-knowledge proofs, could complicate the tracking of funds on the blockchain, posing challenges for investigations.

Europol Report: The SLIP39 Challenge

The report also highlights the complexities introduced by the SLIP39 standard used in many hardware crypto wallets, complicating efforts to recover assets from criminals’ wallets. This standard allows for multiple recovery shares, adding an extra layer of difficulty.

Legitimacy of Crypto Mining and Layer-2 Solutions

Crypto mining and layer-2 solutions are not inherently criminal but can be misused by bad actors. While acknowledging the legitimate applications of these technologies, Europol emphasizes the importance of collaboration between law enforcement, regulators, and the crypto industry to establish effective anti-money laundering measures and support innovation in the sector.

The report was compiled by the EU Innovation Hub for Internal Security, involving Europol and other key agencies.

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