Privacy wallets: Their growing role in Bitcoin money laundering

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Crypto scammers now use privacy wallets for their money laundering activities in Bitcoin The wallets were also used in two of the famous hacks against cryptocurrency this year  Elliptic, a UK based blockchain analytic firm, in its recent report declared that there has been an increase in money laundering activities involving Bitcoin than in previous … Read more

  • Crypto scammers now use privacy wallets for their money laundering activities in Bitcoin
  • The wallets were also used in two of the famous hacks against cryptocurrency this year 

Elliptic, a UK based blockchain analytic firm, in its recent report declared that there has been an increase in money laundering activities involving Bitcoin than in previous time. 

The blockchain analyst reported that the usual mode of operation for carrying out the laundering activities has also changed. The report noted that the previous method was the use of Bitcoin mixers which has phased out for privacy wallets.

Bitcoin Mixers are coin randomizers. They usually make sure that the value of Bitcoin exchanged between a sender and receiver differs greatly. At the end of such transactions, the mixers then make it extremely difficult for the transaction to be traced back to the wallet that initiated the transaction.

However, mixers have a litany of issues and a growing number of regulators have been able to cut their influence. The crypto scammers have seeked an alternative which is the use of privacy wallets.

To carry out these acts, Bitcoin wallets belonging to private individuals instead of exchanges are combined with the anonymity network of Tor. This results in the wallets being able to be used to carry out CoinJoin transactions.

A CoinJoin transaction is when a multi-party BTC transaction is created and the original source is also mixed thereby making it difficult to trace such transactions. This form of transactions has become increasingly popular among money launderers in recent times.

They currently account for 13% of what is being used to carry out the fraud activities.

Privacy Wallets were involved in the most famous crypto hacks of the year

The crypto industry witnessed loads of attacks this year but privacy wallets were used in some of the well known crypto frauds perpetuated with Bitcoin. 

The report stated that privacy wallets were used in the famous Twitter hack where twitter accounts with large followings were asked to make donations into a certain Bitcoin wallet.

The other use of the wallet was during the attack on KuCoin. In this attack, over $200 million worth of Bitcoin was moved out of the exchange.

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