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Europol Reveals Gamified Coin Tracing Training for Law Enforcement at Crypto Conference

Europol is hosting its 6th cryptocurrency conference with over 300 crypto experts from law enforcement and the private sector.

Europol — the law enforcement agency of the European Union — is hosting its sixth cryptocurrency conference, with over 300 crypto experts from law enforcement and the private sector reportedly in attendance. The news was revealed in a Europol press release published on June 14.

The conference — organized by Europol’s European Cybercrime Centre (EC3) and hosted June 12-14 at the Europol headquarters in the Hague, Netherlands — is allegedly the largest law enforcement crypto event in Europe.

Per the press release, the conference focused on opportunities to strengthen cooperation between law enforcement agencies and the private sector in a bid to better prevent and detect cryptocurrency-enabled crime, and aid asset recovery.

Experts in attendance reportedly shared their investigative experience and techniques to combat phishing, thefts of funds and distributed denial-of-service extortion.

In addition, Europol revealed its current development of a a cryptocurrency-tracing game — co-developed with CENTRIC (Centre of Excellence in Terrorism, Resilience, Intelligence and Organised Crime Research).

The game, slated for launch in October at the Europol-INTERPOL Cybercrime Conference, purports to be the first ever gamified law enforcement training opportunity for officials to acquire hands-on guidance for tracing cryptocurrencies with a criminal investigation context.

The conference is also reported to have covered the May 2019 take down of major crypto tumbler Bestmixer.io, effected through a joint effort by Dutch, Luxembourg authorities and Europol.

Private sector participants reportedly included an extensive array of cryptocurrency firms — among them wallet providers, exchanges and payment processors. Some of the major names listed in the press release are Binance, BitPay, Bitfinex, Bitstamp, Coinbase, Ledger, OKCoin, Shapeshift, LocalBitcoins and Tether.

Aside from its focus on crypto-enabled crime, the conference ostensibly engaged with legitimate applications of blockchain technology — including crypto trading, investments and payments.

As the press release notes, Europol’s last crypto conference had issued participants with blockchain-validated certificates to demonstrate the utility of the technology.

As recently reported  — shortly after Europol’s take down of Bestimixer.io —  crypto mixing service Bitcoin Blender voluntarily shut itself down. Following the news, ethereum (ETH) co-founder Vitalik Buterin ventured the possibility of creating an on-chain smart contract-based ether mixer.

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Cryptocurrency Mixers and Why Governments May Want to Shut Them Down

Can a possible government shutdown of cryptocurrency mixers lead to the development of more censorship-resistant avenues?

On May 22, 2019, cryptocurrency mixers (also called tumblers) were front and center on the news cycle, following reports of European authorities shutting down one such service. Law enforcement officials involved said the action was necessitated by reports on Bestmixer.io — i.e., the platform in question that was being used to funnel dirty money via cryptocurrencies.

Stakeholders in the crypto industry decried the action, calling it a gross overreach by government agents. They also declared that it set a dangerous precedent, one that could be inimical to cryptography as a whole.

In the wake of the shutdown, Vitalik Buterin, the co-founder of Ethereum, suggested the creation of an on-chain mixing service. With the eyes of law enforcement seemingly fixed on anonymous cryptocurrency operations, a pivot toward on-chain anonymization might be the solution for those preferring to keep their cryptocurrency transactions anonymous.

Is cryptocurrency transactional anonymity a myth?

While it is common to hear phrases like “anonymous transactions” with respect to cryptocurrencies, the truth is that activities on many blockchains are more pseudonymous than anonymous. Cryptocurrency transactions proceed without the need for a third-party intermediary, and oftentimes, this feature gets conflated with actual anonymity.

In mainstream finance, if person A wishes to send funds to person B, then A has to use a service — e.g., a bank to facilitate the transaction. The identity of both participants will be known to the third-party authenticator, and it could be provided to law enforcement, tax bodies or other government agencies.

For cryptocurrency transactions, the absence of an intermediary means A and B can transact between themselves without revealing their identities. While this may seem like anonymity, it really isn’t, as their transaction is still visible to other participants with access to the blockchain.

Now, let’s imagine a spy or some other “bad actor” — who really has it in for either A or B — using careful blockchain forensics: They can follow these transactions to uncover the real-life identities of the participants. These days, public addresses belonging to cryptocurrency exchanges and other major stakeholders are known to many in the community.

This knowledge is one of the reasons why monitors can become aware of a hack even before platforms become aware of what is happening. A large transaction from a known wallet to an unknown wallet usually raises eyebrows.

There have been numerous instances when the alphanumeric cryptocurrency addresses have been linked to their owners. Back in November 2018, Cointelegraph reported on the United States Treasury Department sanctioning a couple of Iranian nationals implicated in the SamSam bitcoin ransomware scheme.

At the time, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department remarked that it was the first time that BTC addresses had been publicly attributed to individuals on its sanctions list.

Cryptocurrency mixers and how they work

There are, of course, cryptocurrencies that offer near-total anonymity by obscuring almost every detail of a transaction — addresses, amounts involved, etc. Monero (XMR) and zcash (ZEC) are popular examples of these so-called “privacy coins.”

These cryptocurrencies mostly utilize transaction mixers or high-anonymity consensus protocols, such as zero-knowledge proofs (zk-SNARKs), to create almost total obfuscation of transaction details. Zero-knowledge proofs enable transaction verification without needing to authenticate the validity of transactional information.

Not everyone who values anonymity would necessarily want to use these privacy coins, and that is where cryptocurrency mixers come into play. These services obscure the source and destination of virtual currency transactions.

As the name implies, mixers take the target transaction and include it in a basket of other transactions of the same value. The idea is that the “mixing” of these transactions would throw off any spy trying to “follow the money.”

Tumblers aren’t only used for sending cryptocurrencies to other users, though. They can also be employed when trying to remain anonymous when receiving cryptocurrencies from platforms that utilize Know Your Customer (KYC) protocols, like trading services.

For example, person C has made a total of 1 bitcoin (BTC) this past week: 0.5 BTC from trading, 0.3 BTC from her online store, and 0.2 BTC from working as a freelance writer. If C withdraws all 1 BTC to her bitcoin address, she could lose her anonymity because these transactions would be originating from platforms with robust KYC provisions.

Person C could use a cryptocurrency tumbler to mix up these transactions by adding inputs from other users. At the end of the process, C receives her 1 BTC, but the information recorded on the blockchain would be sufficiently scattered to throw off any potential spy.

Cryptocurrency mixing services employ numerous features to ensure privacy and anonymity. Users usually have to create “burner cryptocurrency addresses” (i.e., temporary wallets). These platforms do not store user information for more than 24 hours. The mixing process can last between 30 minutes and six hours. Longer time frames tend to produce more secure transactions.

While there are several cryptocurrency mixing platforms, they usually employ the same process. Users specify their target addresses for receiving the “mixed coins,” then select a convenient time frame and agree to the fee, which typically ranges from 2-5%.

In April 2019, Cointelegraph reported that mixed BTC transactions (“CoinJoins”) constituted about 4.09% of all bitcoin payments. Data from Long Hash — a blockchain analytics firm — showed that bitcoin payments via CoinJoins were up by more than 300% since August 2018.

The war against cryptographic anonymity

Privacy and anonymity aren’t usually concepts that go down well with governing bodies. Thus, it is no surprise that various jurisdictions have taken steps to curtail efforts for ensuring anonymity for cryptocurrency payments.

Countries such as France and Japan have called for privacy coins like monero and dash (DASH) to be banned. In China, blockchain companies are forbidden from designing anonymity-enhancing features, with Beijing saying such regulation is healthy for the industry in the long run.

Government officials usually put forward the same argument to justify their actions: Privacy coins enable criminals to launder money, evade taxes or sponsor terrorist organizations.

As previously reported by Cointelegraph, various governments are stepping up their efforts to monitor blockchain transactions. Some of these jurisdictions are even turning to blockchain analysis specialists like Chainalysis to identify cryptocurrency hackers and tax evaders.

Now, it appears that law enforcement agencies are turning their attention toward cryptocurrency tumblers. Recently, Europol, in conjunction with Dutch and Luxembourgian authorities, shut down Bestmixer.io — one of the largest cryptocurrency mixers in the industry, with a turnover of more than $200 million since its inception back in May 2018.

Source: bestmixer.io

According to the Europol report, the platform was involved in money laundering and several forms of illegal financing. The investigation reportedly began back in June 2018, with Europol planning to share the information gathered from the bust with several other law enforcement agencies in different jurisdictions.

Once the news became public, several notable figures spoke out, including internet security guru and cryptocurrency bull John McAfee, who responded to the news via Twitter, saying:

“Bitcoin mixers are now being targeted. Anonymity itself is slowly being considered a crime. The word ‘Privacy’ will soon mean ‘Criminal Intent.’”

McAfee’s comment echoes those of many in the industry who accuse the government of conflating privacy with criminality. These critics argue that there are many noncriminal reasons why someone would wish to protect their privacy and anonymity while transacting in cryptocurrencies.

Sjors Provoost, a bitcoin developer, quipped:

Cryptocurrency-related robberies aren’t restricted to online hacks. There have been physical assaults on cryptocurrency owner, with some even leading to the death of the victim. From Dubai to Singapore, and even the United Kingdom, cryptocurrency owners have fallen victim to armed bandits looking to steal their valuable virtual coins.

Many government agencies around the world argue that the use of cryptocurrency-anonymizing services akin to being involved in illegal activities. In many ways, it seems to be an extension of anti-cryptocurrency rhetoric by state officials in different jurisdictions.

Cointelegraph reached out to Emin Gün Sirer associate professor of computer science at Cornell University and the co-director of the initiative for cryptocurrencies and smart contracts (IC3), to speak about the merits of such government action vis-à-vis the pervasiveness of money laundering via virtual currencies. According to the professor:

“Money laundering is a problem for all bearer assets, starting with government-issued cash. Every society on earth has decided that the benefits of cash on hand outweigh the downsides of a small percentage of money laundering transactions. And they have enacted effective means for controlling these unwanted use cases at the edges of the financial system, where the banking system meets consumers.”

Despite the continued assertion by state agents that cryptocurrencies find extensive use in criminal activities, the actual hard data available in the public domain shows the exact opposite. Earlier in the year, Japan’s National Police Agency (NPA) released its 2018 money laundering report, which showed virtual currency-related money laundering at less than 2% of all recorded cases.

However, the Financial Services Agency (FSA) of Japan recently declared that it would increase its oversight of cryptocurrency exchanges to stamp out money laundering. With the Financial Action Task Force (FATF) visiting the country in the fall of 2019, Japan hopes to gain a favorable rating from the intergovernmental body.

Perhaps the FSA could focus on the other avenues on which close to 99% of all money laundering in the country happen. Cryptocurrencies certainly didn’t contribute to the country receiving the FATF’s lowest rating in terms of Anti-Money Laundering (AML) and KYC compliance back in 2008.

Perhaps a pivot toward on-chain anonymization?

If governments continue to clamp down on avenues that ensure transactional anonymity, then it stands to reason that developers will create more robust platforms that will be more difficult to police. Professor Sirer made similar remarks in his correspondence with Cointelegraph, writing:

“The problem with shutting down a mixer/tumbler is that it will force the community to develop more effective tumblers and mixers that cannot be shut down or traced as easily.”

One such example could be the pivot toward on-chain anonymization. Shortly after the Bestmixer.io shutdown, Ethereum’s Buterin proposed the creation of an on-chain ether (ETH) mixer as a way of improving user privacy on the blockchain.

Buterin’s proposed ETH mixer goes beyond spreading transactions among multiple users, instead suggesting to completely obfuscate all transaction details by ensuring that they don’t appear on the blockchain. Buterin did, however, mention that such a system might only be able to handle small amounts of ETH.

When asked about the viability of on-chain mixers, Sirer opined:

“I doubt that either Bitcoin or Ethereum will add on-chain anonymity measures any time soon. Bitcoin is capacity limited and change-averse, while Ethereum is focused on building a world computer. But other coins will emerge with stronger guarantees, and there’s plenty of research into bolt-on alternatives. By clamping down on a service that is easy to trace, law enforcement is setting the stage for another generation of services that they will not be able to control or corral.”

Section 10 of the bitcoin white paper, as written by its creator Satoshi Nakamoto, focuses on privacy — i.e., the limiting of personal information of transacting parties. Privacy and anonymity are arguably fundamental tenets of cryptocurrency held by many enthusiasts. It doesn’t appear to be beyond the realms of comprehension to envision that developers will create censorship-resistant platforms that allow anonymous cryptocurrency transactions — if pushed to do so.

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Hodler’s Digest, May 20–26: Top Stories, Price Movements, Quotes and FUD of the Week

Craig Wright again makes claims about his true identity as Satoshi Nakamoto, while the SEC delays a BTC ETF decision, again.

Top Stories This Week

Copyright Registrations Do Not Recognize Craig Wright as Satoshi Nakamoto

Although self-proclaimed Satoshi Nakamoto Craig Wright, an Australian computer scientist, filed United States copyright registrations for the bitcoin white paper and the bitcoin (BTC) source code, that does not mean that the U.S. Copyright Office recognized Wright as Nakamoto. A spokesperson for Wright had told the Financial Times (FT) this week that the office was the first government agency to recognize Wright as the creator of the leading digital currency, a claim that has been met with skepticism by the cryptocurrency community. However, the office told the FT that it does not investigate whether there is a connection between a claimant and a pseudonymous author, and that registering the source code does not protect the intellectual property of bitcoin as an invention.

USD Stablecoins Hit Spot Trading Volume Record Highs, With USDT Still Dominating Market

Cryptocurrency research firm Diar reported this week that the market capitalization for USD stablecoins has hit all-time highs, exceeding $4 billion. The data shows specifically that stablecoins have a market cap of around $4.3 billion, revealing a surge in USD stablecoin trading volumes in regard to the USDC’s 130% uptick between April and May, as well as TrustToken’s TrueUSD $3.8 billion in volume in May. Controversial stablecoin tether still remains in the lead, the report notes, with trading volumes this year to date exceeding $1.3 trillion — already $200 million higher than the whole of 2018. However, Diar additionally states in the report that the overall broad use case of stablecoins has been slow to gain traction.

Tether Says It Invested Some of Its Reserves Into Bitcoin and Other Assets

Stablecoin issuer Tether said this week in a court filing that it had invested some of its reserves in BTC. According to the documents, an attorney for Tether’s associated firm Bitfinex stated that Tether had invested “a small amount” of Tether’s reserves into bitcoin, specifying that “prior to the April 24th order […] Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin,” and adding that Tether made “other investments, including purchasing other assets.” As a response to the admission, the judge in charge of the ongoing investigation into whether Bitfinex secretly used Tether reserves to cover a $850 million loss doubted the logic of investing a stablecoin in a volatile asset like bitcoin.

Tether Says It Invested Some of Its Reserves Into Bitcoin and Other Assets

US SEC Postpones Verdict on VanEck ETF Application, Again

The U.S. Securities and Exchange Commission (SEC) delayed its decision again concerning the VanEck bitcoin (BTC) exchange-traded fund (ETF) proposal. The SEC has added a 35-day period for gathering more information and opinions on the proposal, which was originally filed by CBOE last year. In this week’s SEC filing, the organization listed 14 questions about the proposal for the public to review and answer, with the idea of using the answers to help them decide about approval. The questions are related to the ability to protect investors and public interest from fraud and similar exploitations. The organization had already delayed its decision on the Securities Act update proposal that would allow bitcoin ETFs to be traded on CBOE.

US Telecoms Giant AT&T Now Accepting Crypto Payments Via BitPay

U.S. telecom and media giant AT&T announced this week that it would accept cryptocurrency for paying phone bills online using crypto payments platform BitPay. BitPay converts crypto into fiat and is currently used by more than 20,000 businesses. AT&T had previously announced at the end of 2018 that it was working on a suite of blockchain solutions compatible with Microsoft Azure and the IBM Blockchain Platform. This week’s reveal about its crypto acceptance is reportedly the first time that a U.S.-based business in the wireless network industry will enable bill payments with BitPay.

Winners and Losers

The crypto markets are seeing some calm at the end of the week, with bitcoin trading slightly below $8,000, ether at $250 and XRP at $0.38.

The top three altcoin gainers of the week are brother, emaratcoin and compound coin. The top three altcoin losers of the week are bitguild plat, playcoin [qrc20] and speed mining service.

Winners and Losers

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“To kind of burst the bubble, it’s not our only database, it’s not our best database, it’s not currently very fast or very scalable and it’s not very mature, right?”

– Dale Chrystie, FedEx’s dedicated blockchain strategist

“I don’t think banks, I don’t think governments will go away. Banks are applying a very important regulatory framework that I actually think is important for society. I personally believe that banks will continue to serve that role, they’re good at it. […] I think this is a new set of technologies that they can benefit from to grow their business.”

– Brad Garlinghouse, Ripple CEO

Most Memorable Quotations

“We urge lawmakers to recognize the unparalleled economic power that permissionless innovation has unleashed and to act to let crypto and blockchain technologies flourish. We know lawmakers want to support economic growth and want them to seize the opportunity to lead the charge.”

– Jeremy Allaire, CEO of crypto finance startup Circle

Prediction of the Week

NYMEX Trader: Bitcoin Soon to Move Back to $7,000, Markets to Consolidate

Anthony Grisant, a cryptocurrency trader at the New York Mercantile Exchange (NYMEX), said this week that bitcoin will likely move back to $7,000 and consolidate soon. Speaking to CNBC, NYMEX’s Grisant said that bitcoin will go back to $7,000 for a short period of time, and that the market will then consolidate: “I think it consolidate a little bit. […] I think consolidation for this market is very healthy.” Grisant also noted that volumes have come back down over the past few sessions, an indication that buyers are not returning to the market with the same strength they were a few weeks prior.

FUD of the Week

Two Miners Purportedly Execute 51% Attack on Bitcoin Cash Blockchain

This week, two miners reportedly executed a 51% attack on the bitcoin cash (BCH) blockchain. While 51% attacks are normally assumed to be carried out with malicious intent, this case occurred when two mining pools attempted to prevent an unidentified party from taking some coins that — due to a code update — were essentially “up for grabs.” The two miners, with majority network control — BTC.top and BTC.com — carried out the attack in order to prevent an unknown miner from taking coins that were sent to an “anyone can spend” address following the original hard fork in May 2017. According to statistics on Coin.Dance, BTC.top and BTC.com control 43% of the bitcoin cash mining pool.

UK Watchdog Reports $34 Million Lost in Crypto and Forex Scams Last Year

The United Kingdom’s financial regulator released a report this week that cryptocurrency investors in the country have lost more than $34 million due to crypto and forex scams from 2018 to 2019. The regulator gathered data from the U.K. national fraud and cybercrime reporting center, Action Fraud, finding the individual losses due to scams had decreased from $76,000 to $18,500, while total losses fell by $14 million. However, the report noted that the number of times scams were reported had overall tripled, with 81% of the reports related to cryptocurrency scam claims. The U.K. regulator also noted that scammers tended to use social media to find potential investors, often using pictures of celebrities with fake endorsements.

UK Watchdog Reports $34 Million Lost in Crypto and Forex Scams Last Year

Europol Shuts Down $200 Million Crypto Mixing Service Bestmixer

Cryptocurrency mixing service Bestmixer.io has been shut down this week by Dutch, Luxembourg and Europol authorities. Cryptocurrency tumblers are tools that allow crypto transactions of nonprivate coins to become more private by mixing crypto funds with others in order to obscure the funds’ original source. Bestmixer.io has had a reported turnover of more than $200 million since its launch in May 2018, and mixed cryptocurrencies including bitcoin (BTC), litecoin (LTC), bitcoin cash (BCH) and others. The investigation that preempted the shutdown began in June 2018, as the authorities found that a large number of the mixed coins had been used in money laundering.

Best Cointelegraph Features

SEC Postpones VanEck Bitcoin ETF, Yet Again. Should We Expect an Approval in 2019?

The U.S. SEC has again delayed a decision on approving or disproving a blockchain exchange-traded fund. As the delays keep coming, along with open-ended questions for the public, Cointelegraph takes a look at the chances for the SEC to ever give an ETF the green light.

Insured Cryptocurrency Custody Services and Their Potential Impact: The Key to Institutional Investment Growth?

As seemingly a wave of cryptocurrency companies have begun offering crypto custody services, Cointelegraph examines the importance of the existence of crypto custody and how it can help foster institutional adoption.

Confident in the Future: EOS Developers Attempt 10% Buyback Ahead of Major Announcement

Block.one, the developer behind EOS, revealed this week that they were seeking a 10% buyback of its stock for reportedly the second time. In this analysis, Cointelegraph details the potential impetus behind the idea, and what it means for Block.one’s future plans.

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Europol Shuts Down $200 Million Crypto Mixing Service Bestmixer

A Dutch investigation agency and Europol have shut down a $200 million crypto tumbler for being involved in money laundering.

Dutch, Luxembourg authorities and Europol have shut down one of the three largest cryptocurrency tumblers, Europol reported on May 22.

A cryptocurrency tumbler, also known as a cryptocurrency mixing service, is an anonymity tool that claims to transform transactions of non-private coins to private ones by mixing crypto funds with others, which makes it difficult to track the funds’ original source.

According to the report, the Dutch Fiscal Information and Investigation Service (FIOD) has now seized six servers of major crypto tumbler Bestmixer.io, which had a reported turnover of at least $200 million since its launch in May 2018. The service was purportedly one of the three largest mixing services for cryptocurrencies including bitcoin (BTC), litecoin (LTC), bitcoin cash (BCH) and others.

After initiating an investigation back in June 2018, the FIOD, along with Europol and Luxembourg authorities, have banned the platform, as they found that a large number of mixed coins on Bestmixer came from criminal activity and were allegedly used for money laundering or illegal financing.

History of Cryptocurrency Laundering Service Bestmixer.io

As Europol noted, Bestmixer’s closure is the first legal enforcement action of its nature against a cryptocurrency tumbler. At press time, the Bestmixer website is not operating, with a FIOD notice claiming “you are not anonymous.”

Bestmixer

Screenshot of Bestmixer website at press time

The FIOD reportedly collected data on all the transactions on the platform in the past year, including chat messages, bitcoin addresses, IP-addresses and more. The authority is planning to analyze the acquired information and share the results with other countries, Europol noted.

At press time, a number of crypto mixers can be found online, including ChipMixer, BitMix.Biz and BitBlender, among others.

Recently, Europol and German police seized the servers of a dark web marketplace, taking six figures in crypto from the arrested suspects.

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German Police Seize Six Figures in Crypto From Suspects Involved in Dark Web Site

The Wall Street Market, the world’s second largest dark web market, was shut down with six figures in crypto seized by police.

German police, along with Europol, have shut down servers of a dark web marketplace and seized six figures in crypto from the arrested suspects, Europol announced on May 3.

The Wall Street Market, reportedly the world’s second-largest dark web market, has been shut down by the German Federal Criminal Police under the authority of the German Public Prosecutor’s office.

According to the report, German authorities arrested three suspects and seized over 550,000 euros ($615,000) in cash  along with bitcoin (BTC) and monero (XMR) in six figure amounts (actual value unspecified) as well as several cars, computers, hard drives and other items.

Europol noted that the Wall Street Market had more than 1.15 million registered users, with 5,400 of them registered as sellers of drugs, stolen data, fake documents and malicious software.

In the same announcement, Europol also officially announced that Finnish Customs also staged a takedown of dark web marketplace Valhalla, also known as Silkkitie. According to Helsinki Times, the authorities have also made a “significant bitcoin seizure,” from the website, which was operational in the anonymous Tor network since 2013.

In other crime news, two men recently plead guilty in the United States for illicitly selling steroids and controlled substances and laundering millions of dollars in cryptocurrencies and Western Union payments.

As well, in early April a court in Toronto ordered an online drug dealer to pay his entire $1.4 million bitcoin holdings to the state in what is reportedly Canada’s largest ever forfeiture.

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Europol Nabs 11 in Crypto Drug Money Laundering Case

Europol has shut down a drug trafficking ring that used cryptocurrencies and credit cards to launder more than €8 million through a Finnish crypto exchange, it announced on Monday.

The investigation was coordinated by Europol and executed by Spain’s Guardia Civil in conjunction with Finnish authorities and the investigative arm of the U.S. Department of Homeland Security, and resulted in eleven arrests, according to a statement. The funds were laundered from Spain to Colombia through an unnamed cryptocurrency and credit cards.

Roughly 137 individuals were investigated, and the suspects used a total of 174 bank accounts, according to the statement, which continued:

“The criminals based in Spain were contacted by drug traffickers to launder money obtained from their illegal activities. They picked up the illicit proceeds in cash, which were then split into small quantities to be deposited into hundreds of third bank accounts.”

With the cash “circulating in the financial system” the alleged criminals first used credit cards to withdraw the money in Colombia, but fearing discovery, they subsequently shifted to converting the funds into cryptocurrency and then into Colombian pesos through the Finnish crypto exchange.

Europol’s statement noted that the unnamed exchange cooperated with Finnish authorities by sharing the suspects’ information.

The EU law enforcement agency said it plans to strengthen its efforts to police criminal activities carried out with cryptocurrencies.

“Europol will continue to coordinate across EU Member States and beyond, to effectively respond to this rising threat,” its statement read, adding that it has implemented “specialized training courses to assist law enforcement officers in identifying the use of cryptocurrencies by organized crime networks.”

Europol has previously issued reports on the illicit usage of cryptocurrencies, most recently warning that zcash, monero and ether are increasingly implicated in cybercrimes in addition to bitcoin.

Spanish patrol car image via Shutterstock

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Europol: Zcash, Monero and Ethereum Follow Bitcoin in Cybercrime

Europol, the law enforcement agency of the European Union (EU), has warned that the virtual currencies Zcash, Monero, and Ethereum are increasingly being used in the digital underground market. The agency, however, reiterated that the leading cryptocurrency Bitcoin is still the preferred currency in cybercrime.

In its 2017 Internet Organised Crime Threat Assessment (IOCTA) report, Europol stated that the darknet landscape is rapidly evolving. The agency concluded that Monero is fast gaining darkweb popularity because of its “additional security and privacy features” making it one of the easy cryptocurrency choices for criminals.

Part of the report reads:

“Cryptocurrencies continue to be exploited by cybercriminals, with Bitcoin being the currency of choice in criminal markets, and as payment for cyber-related extor on a empts, such as from ransomware or a DDoS attack. However, other cryptocurrencies such as Monero, Ethereum and Zcash are gaining popularity within the digital underground”.

The report further detailed the main reason why cryptocurrencies are becoming a favorite among criminals:

“Transactions cannot be attributed to any particular user/address, all coins used in a transaction are ‘hidden’ by default, and transaction histories are kept private.”

Other highlights of the IOCTA report

In its report, Interpol focuses on the popularity of digital currencies on darknet marketplaces. As an example, it cites the case of a Monero-focused ransomware called Kirk that was launched in early 2017.

In the case of Ethereum, the report claimed that smart contracts based on the cryptocurrency could be utilized to legalize payments between crime service providers. It also presented a case of a proposed decentralized darknet market that is designed to operate on the Ethereum Blockchain.

Meanwhile, the document clarified that Zcash is yet to be the subject of a law enforcement investigation. However, the virtual currency is reportedly being eyed by darknet marketplaces due to its privacy features, which hide both the transaction recipient and the transaction amount.

The case of AlphaBay

The biggest darknet market AlphaBay was shuttered by Europol in early 2017. The closure was part of a globally coordinated crackdown on underground markets. However, prior to its shutdown,  AlphaBay had already added Ethereum and Monero as payment options, and previously had plans to include Zcash.

While any currency can be associated with any criminal activities, such security issues with cryptocurrencies provide an easy excuse for governing bodies to continually be skeptical about the possible value and security of digital currencies.