Cryptocurrency circulating in "mixers" is at an all-time high. Want to guess why?

Expand Getty Images

The amount of cryptocurrency circulating in privacy-enhancing mixing services hit an all-time high this year, with funds from wallets belonging to government-sanctioned groups and criminal activity nearly doubling , researchers reported Thursday.

Mixers, also known as tumblers, obfuscate cryptocurrency transactions by creating a disconnect between the funds a user deposits and the funds they withdraw. To do this, mixers combine the funds deposited by a large number of users and mix them randomly. Each user can withdraw the entire deposited amount, minus a cut for the mixer, but since the coins come from this confusing pool, it is more difficult for blockchain investigators to track precisely where the money went.

Significant risk of money laundering

Some mixers provide additional obfuscation by allowing users to withdraw funds of different amounts sent to different wallet addresses. Others attempt to completely conceal mixing activity by changing the fees on each transaction or by changing the type of deposit address used.

Using the blender is not automatically illegal or unethical. Given how easy it is to track the flow of Bitcoin and some other types of cryptocurrency, there are legitimate privacy reasons why anyone might want to use one. But given the widespread use of cryptocurrency in online crime, mixers have become a go-to tool for criminals who want to withdraw money without getting caught by the authorities.

"Mixers pose a tough question for regulators and members of the cryptocurrency community," wrote researchers at cryptocurrency analytics firm Chainalysis in a report that linked the rise to the rise. volumes filed by sanctioned and criminal groups. "Virtually everyone would agree that financial privacy is valuable, and that in a vacuum, there's no reason services like mixers can't provide it. However, data shows that mixers present a significant risk of money laundering, with 25% of funds coming from illicit addresses, which cybercriminals associated with hostile governments take advantage of."

The cryptocurrency received by these mixers fluctuates widely from day to day, so researchers find it more useful to use longer-term measurements. The 30-day rolling average of funds received by mixers hit $51.8 million in mid-April, an all-time high, Chainalysis reported. The high water mark was almost double the inflow volumes at the same point last year. Additionally, illicit wallet addresses accounted for 23% of funds sent to mixers this year, up from 12% in 2021.

Thieves Gallery

As the chart below illustrates, the increases came primarily from higher volumes sent from addresses linked to illicit activity, such as ransomware attacks, cryptocurrency scams, and funds stolen by US government-sanctioned groups. To a lesser extent, volumes sent from centralized exchanges, DeFi or decentralized finance protocols, also drove the rise.

Enlarge On-chain analysis

A breakdown of volumes linked to illicit sources shows that the spike is mainly due to sanctioned entities – mainly of Russian and North Korean origin – followed by cryptocurrency thieves and fraudsters pushing cryptocurrency investment scams.