Why are bitcoin mixers often accused of laundering money?

[Becassine]

All the banks have laundered money from illicit activities and still do. Sometimes they get a slap on the wrist. "too big too fail" ... How many politicians have received cash bribes?

When the "ruling elites" have figured out how bitcoin works and can launder the embezzled money, then the mixers will be in the clear....

The irony of abolishing cash and mixers when the worst fraudsters are certainly not ordinary citizens!

https://www.youtube.com/watch?v=bGr2JAOSgew

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[FinneysTrueVision]

Bitcoin is not truly anonymous, it's pseudo-anonymous, that is why people use mixers to preserve their privacy. You can not stop criminals from using whatever tools are available to them. Even KYC exchanges can be used to launder money. Anti-money laundering laws aren't actually effective at stopping criminal activity. It costs more to comply with AML laws than the amount of funds confiscated from illicit activity. These costs means billions of dollars in profit for the AML compliance industry so there is an enormous financial motivation to keep these ineffective policies in place.

[blue Snow]

To this day, many bitcoin mixers have been caught in money laundering cases, such as Chipmixer, Tornado Cash, Bitcoin Fog, and others. Apart from that, even though the bitcoin mixer users are at fault, those who make the mistake of using a mixer as a way of covering up their crimes, why is the Bitcoin mixer platform also considered guilty? Or is there a conspiracy between them?

I don't see any conspiracy behind this, because nature of the criminals. It also depends on what people think. I even think if a mixer is good for my privacy. If using a mixer, I can hide my wealth and no one knows the amount of my bitcoin. my life is calm lurking from the hacker, especially the government, who always ask for data on the wealth of its citizens. Who knows when collapses they deprived our bitcoin for build the economic.

[BlackBoss_]

I don't see any conspiracy behind this, because nature of the criminals. It also depends on what people think. I even think if a mixer is good for my privacy. If using a mixer, I can hide my wealth and no one knows the amount of my bitcoin. my life is calm lurking from the hacker, especially the government, who always ask for data on the wealth of its citizens. Who knows when collapses they deprived our bitcoin for build the economic.

By laws, current laws, mixers are not considered is illegal in all countries.

Crypto Mixers and AML Compliance

Are crypto mixers legal?

Despite their use by criminals, crypto mixers are not explicitly illegal in most jurisdictions. Whether they are compliant, however, is a different question.

In the United States, the Financial Crimes Enforcement Network (FinCEN) has confirmed that individuals and centralized businesses offering custodial mixing services must register as money transmitters under the Bank Secrecy Act (BSA), and have three key obligations:

• register with FinCEN,
• maintain an anti-money laundering and know-your-customer compliance program, and
• meet all applicable reporting and record-keeping requirements.

We aren’t aware of any custodial mixers currently following these rules. And given that privacy preservation is the main reason that many users interact with crypto mixers, it seems unlikely that one could implement these procedures and still retain their users.

Sanctions also matter for mixers. All mixers that want to do business in the U.S. must take measures to ensure they don’t do business with sanctioned entities. And, as we’ll cover below, even non-custodial smart contract-based mixers not covered by the BSA can be subject to sanctions designations, provided of course they aren’t based in the U.S.

We see more sanctions, seizures, arrests related to cryptocurrency mixers and their developers. Regulations against cryptocurrency mixers will be upgraded and stricter when more laundering activities use cryptocurrency mixers and with bigger flows in value.

As of now, it is not true to say cryptocurrency mixers are illegal globally.

[Gallar]

In your opinion, how to prevent the use of bitcoin as a means of money laundering? While we may not recommend going to KYC, it is useless and the anonymity of bitcoins will be lost.

Actually, if asked about something like this, it's a little confusing. Because until now I have never heard of ways to prevent bitcoin from being misused. Because maybe it's not all about the bitcoins, but it's all about the people who hold the bitcoins. Because even if it creates a method or rule so that the bitcoin realm is like a mixing platform, it doesn't commit crimes or fraud. But his name is also a greedy human being, of course he will find a way too so he can trick all of these rules. So stopping all of that is quite difficult.
Because let alone bitcoin, even fiat money has been around for a long time in the world. Until now, it is still not completely able to overcome people who misuse money, but there are still people who do misuse it.

Moreover, bitcoin, with its very high level of anonymity, with this, it is very easy to be used as an opportunity by greedy people. So in essence it is not bitcoin or the mixing platform that should be tightened or changed. But more precisely, you have to be able to build awareness about bitcoin, which must be free from crime. Even though it won't be easy, over time this ideology will definitely grow in the minds of everyone who is involved in the bitcoin world.

[Spinflight]

It is because people can launder money using bitcoin mixers. It is not rocket science. If you somehow got coins that have bad history, you can use a mixer and get different coins. The problem here is, you don’t know whose coins you are getting so the coins you’ll get might have a worse history then what you had in the first place. I wouldn’t use any crypto mixers personally for that reason alone.

 There are other privacy focussed options on the blockchain which won't result in you getting tainted coins back...

You are right, a while ago I was reading an article about the same issue you referred here, it will take me some time to find the link but they were suggesting ZK-proof mechanism instead of KYC which will hide the identity of the user but help them to trace back if needed and I think only the owner could do that but after tornado was made developers has made it open source for everyone. (source)
 

 It's already been done, indeed it's been live for a couple of years. Basically a webapp wallet which connects to smart contracts on the blockchain which keep individual user's funds separate via zero knowledge proofs.

 There's plenty of completely legitimate uses for a privacy system, rather than a mere mixer. For instance paying a lawyer; paying salaries to your workforce anonymously such that individual amounts are not disclosed; changing accounts after your original was doxed; preventing abuse, begging or harassment from people or governments due to your wealth or politics; if you've inadvertently received tainted coins; protecting your funds from the ex-wife after divorce; making charitable or political donations; trading mined crytocurrencies OTC such that the price paid is private and the settlement is entirely onchain; because you hold the perfectly reasonable opinion that KYC is invasive and encourages abuses of power etc. It's also a basic human right.

 For instance railgun on Polygon allows you to create a view key to particular transactions you've made in order to prove to the authorities, if you should need to, that the usage of such was entirely legitimate. Revealing any transactions however is entirely a choice for the user, there is no admin with visibility or the ability to coerce this. You can do any of the above use cases with it, and more, or use it as just a mixer. It also seems to be much cheaper to use than a bitcoin mixer and can use any quantity of wrapped tokens.

 Tornado Cash lacked the facility for users to prove their use of such was legitimate, which might go some ways to explaining the massive over the top reaction to it.

Bitcoin is not truly anonymous, it's pseudo-anonymous, that is why people use mixers to preserve their privacy. You can not stop criminals from using whatever tools are available to them. Even KYC exchanges can be used to launder money. Anti-money laundering laws aren't actually effective at stopping criminal activity. It costs more to comply with AML laws than the amount of funds confiscated from illicit activity. These costs means billions of dollars in profit for the AML compliance industry so there is an enormous financial motivation to keep these ineffective policies in place.

 True, though if you know a thing or two about privacy sets and timings you can make the chances of tracing blockchain transactions rather tiny. Simplest way is to use the entirely of the DEX liquidity on the blockchain ( which is billions even for smaller ones) to mask your own transactions. For instance if I deposited my protocols own token, let's call it MyWonderfulProtocol Coin, to pay my coder's salaries with. Every month I can privately swap MWPC for Dai, USDC or USDT and transfer that to the devs. The total amount swapped would be visible, but the internal transfers to each dev would be entirely anonymous, and hidden amongst all the other stablecoin transactions. The external transaction would be mainly lost in all of the other volume surrounding MWPC, as it's wonderful and therefore has lots of volume. The devs can then withdraw and sell on a CEX without having disclosed their salaries.

 If plod or the IRS demands to know why I'm putting tens of thousands of dollars a month through railgun then I can merely generate a view key for them to show that the use and payments made were entirely legitimate. Or tell them to go forth and multiply as I know that if they do take me to court I can prove compliance.

 Hence it isn't that mixers are inherently a bad thing, though the fees charged seem outrageous to me, just dangerous to know or use due to their extremely limited functionality.

[The Sceptical Chymist]

In July, we found that almost 10% of all cryptocurrencies held by illicit entities have been laundered through a mixer in 2022.

Huh.  I read the article in the link, but I'm wondering how the government knows what coins were mixed--and by that I mean I'm curious as to whether the pigs used chain analysis tools to figure it out or if they figured it out via other means while doing their investigations.  I would assume if law enforcement agencies could use analysis tools to crack money laundering cases mixing would be kind of useless.

If I remember correctly, one of the reasons why Chipmixer was charged as guilty was because there was a chat log from one of the agents asking whether they could help launder their money, and the operator said yes.

Jesus, I wonder if that's actually true.  I don't know who was running CM, but if they answered a question like that in the affirmative then they were fucking stupid.

[BlackBoss_]

Huh.  I read the article in the link, but I'm wondering how the government knows what coins were mixed--and by that I mean I'm curious as to whether the pigs used chain analysis tools to figure it out or if they figured it out via other means while doing their investigations.  I would assume if law enforcement agencies could use analysis tools to crack money laundering cases mixing would be kind of useless.

They offered millions of dollar for anyone can crack the Monero untraceable transactions.

IRS Dishes Out $1.25 Million for Data Firms to Crack Monero
Chainalysis and Texas firm win million-dollar IRS contract to crack Monero

They are news from 2020 and I don't find any news about further progress to crack down Monero untraceable transactions since 2020.

[OgNasty]

Huh.  I read the article in the link, but I'm wondering how the government knows what coins were mixed--and by that I mean I'm curious as to whether the pigs used chain analysis tools to figure it out or if they figured it out via other means while doing their investigations.  I would assume if law enforcement agencies could use analysis tools to crack money laundering cases mixing would be kind of useless.

They offered millions of dollar for anyone can crack the Monero untraceable transactions.

IRS Dishes Out $1.25 Million for Data Firms to Crack Monero
Chainalysis and Texas firm win million-dollar IRS contract to crack Monero

They are news from 2020 and I don't find any news about further progress to crack down Monero untraceable transactions since 2020.

There’s a reason that a lot of exchanges don’t list Monero. The government has already come forward and said that mixers are useless for mixing large amounts, but that won’t stop thieves from trying and eventually getting arrested. My question would be, if mixers aren’t facilitating money laundering, who is using them and why? I don’t buy the privacy argument, there are other ways to use BTC with privacy besides mixing coins.

[Spinflight]

There’s a reason that a lot of exchanges don’t list Monero. The government has already come forward and said that mixers are useless for mixing large amounts, but that won’t stop thieves from trying and eventually getting arrested. My question would be, if mixers aren’t facilitating money laundering, who is using them and why? I don’t buy the privacy argument, there are other ways to use BTC with privacy besides mixing coins.

 If you don't buy the privacy argument then that raises the question of why?

 Simple question for you, assuming your are in the USA or similar jurisdiction, do you pay your taxes on crypto? If you do then it is perfectly natural for you to consult a tax lawyer. Any conversations with such a lawyer are privileged hence your bank and your government have no business knowing that you are paying a lawyer as it is intrinsically private. Should the government be able to target those who consult with a tax lawyer, assuming they are doing something wrong, then that would be an abuse.

 Hence anyone in crypto has a need for onchain privacy such that they can pay such a lawyer privately without the government or their bank knowing.

 The government can't have it both ways, either everyone pays their taxes and therefore has a need for private transactions, or they don't tax crypto earnings.

[Ale88]

In your opinion, how to prevent the use of bitcoin as a means of money laundering? While we may not recommend going to KYC, it is useless and the anonymity of bitcoins will be lost.

You simply cant. A neutral tool will always be used both for good purposes and for bad purposes. Just like how you can't 100% force people to not use knives to stab people, and how you can't 100% force people to not use the internet to scam people.

This is it, as simple as that. Every tool can be used to do good or bad, it's up to the person using that tool deciding what to do. It's also interesting how some people, some media, and some governments, pretend that all the bad things are made using cryptos as payments, sure, because before cryptos there were no money laundering, no terrorism, and other things like that...

[fruktik]

Bitcoin is not truly anonymous, it's pseudo-anonymous, that is why people use mixers to preserve their privacy. You can not stop criminals from using whatever tools are available to them. Even KYC exchanges can be used to launder money. Anti-money laundering laws aren't actually effective at stopping criminal activity. It costs more to comply with AML laws than the amount of funds confiscated from illicit activity. These costs means billions of dollars in profit for the AML compliance industry so there is an enormous financial motivation to keep these ineffective policies in place.

       What is now stopping criminals from buying other people's data and getting verified on centralized exchanges? Nothing. Therefore, there is still an option with mixers to cover your tracks. I think that this method is used quite often, but it is not the only one. Whoever needs it will always find workarounds. Sometimes, it's just a matter of time.
       Well, not only mixers are in demand among criminals. There are many respectable people for whom anonymity is important, because. the state sticks its nose into private life.

[Blitzboy]

Bitcoin's privacy and transparency have drawbacks. They make it appealing and difficult. Isnt every great invention like that? Internet benefits and cybercrime are examples. Bitmixers are tools. A mixer can be used for good or evil, like a knife. Separate the tool from user behavior.

We could use advanced analytics to detect criminal activities without undermining Bitcoin's essential principles. Isnt Bitcoin about changing things and finding new solutions? We have brilliant minds on this! Bitcoin mixers are guilty by accountability. Platforms must prevent crime even while people abuse it. Navigating a new, disruptive technology isnt a conspiracy. Have trust!

[Fiatless]

In your opinion, how to prevent the use of bitcoin as a means of money laundering? While we may not recommend going to KYC, it is useless and the anonymity of bitcoins will be lost.

The majority of crypto users don't support the use of mixers to cover up criminal activities. But the problem will be how to identify funds gotten from illegal means. Mixers offer services that enhance privacy but how people use it cannot be controlled. Even some wonderful services or products can be misused. Who would have taught that an aircraft will be used for a terrorist attack?

To this day, many bitcoin mixers have been caught in money laundering cases, such as Chipmixer, Tornado Cash, Bitcoin Fog, and others. Apart from that, even though the bitcoin mixer users are at fault, those who make the mistake of using a mixer as a way of covering up their crimes, why is the Bitcoin mixer platform also considered guilty? Or is there a conspiracy between them?

Bitcoin is a decentralized currency so there is nobody or institutions to protect it when attacks come. Most of these conventional banks engage in much more illegal activities but because they are connected to the government or big corporations, the news is kept secret from the public. But the news of bitcoin mixer being used for criminal activities will receive wide coverage. Top banks like HSBC, Standard Chartered, Bank of New York Mellon, JPMorgan Chase, Deutsche Bank, etc, are all agents of multibillion-dollar money laundering activities but their scandals attract little media coverage.

[Doan9269]

In your opinion, how to prevent the use of bitcoin as a means of money laundering? While we may not recommend going to KYC, it is useless and the anonymity of bitcoins will be lost.

The government have been trying the impossibilities they know themselves that can't be regulated, some good examples were already made from above comments, government cannot control every of human activities effectively, they have been raising campaigns over child abuse, some do drugs dealings but yet people make use of this same thing for the good and the bad intentions despite they don't mind the jail terms conditions and while same drugs are used in the pharmaceutical industries for human health, which means inherently every thing has a good and bad side just as we have in people as well, there are good and bad people but we all live together.

To this day, many bitcoin mixers have been caught in money laundering cases, such as Chipmixer, Tornado Cash, Bitcoin Fog, and others. Apart from that, even though the bitcoin mixer users are at fault, those who make the mistake of using a mixer as a way of covering up their crimes, why is the Bitcoin mixer platform also considered guilty? Or is there a conspiracy between them?

If you're seeking for privacy with the use of a bitcoin mixer there's nothing bad in that, now when we discover the risk in using one and the threat they suffer from government regulations then it's better for one to look for a best alternative means to using them, maybe by running a full node transaction using bitcoincore could be more encourage, mixers are not guilty of anything just as banks fan accommodate opening bank account for anyone, they are open for making their own business as every other organizations operates.

[LogitechMouse]

In your opinion, how to prevent the use of bitcoin as a means of money laundering? While we may not recommend going to KYC, it is useless and the anonymity of bitcoins will be lost.

Just like fiat currency, you can't prevent it.
Fiat currency has been used by different people in money laundering, and so is Bitcoin as well.

Re: Why are bitcoin mixers often accused of laundering money?

Because of the transaction making it anonymous? I think this is the reason why criminals often use mixers in order to spread out the money that they got. Bitcoin mixers are just a tool for both the innocent, and the criminals to be used. It's like Bitcoin being used as a way to scam people. Criminals are using these mixers for transaction. As for a way to stop this, seizing it I guess will be the solution like what they did to Chipmixer. The question is until when will the authorities will be doing it knowing that when they seize one mixer, multiple mixers arise.

[Plaguedeath]

The question is until when will the authorities will be doing it knowing that when they seize one mixer, multiple mixers arise.

Every new mixer will comes up because they understand there are demands for this business, since the authorities only handle a big or popular mixer, so it will keep repeat. Even the authorities will declare mixer is illegal, anyone can still use Tor network and the mixer is still available in black market. So, there's no one can stop anyone to use Bitcoin and mixer.