Russia eclipses North Korea in murky coin mixer market
By Carine Lee
03:49, 22 July 2022
This year Russia has eclipsed North Korea as the world’s biggest player in the murky world of coin mixers which make users' digital coins untraceable.
Russian darknet market Hydra, which was sanctioned by the US in April 2022, accounts for 50% of all funds moving to mixers from sanctioned entities this year.
An agency of the US Treasury Department, targeted Hydra due to its involvement in drug sales, money laundering, crypto thefts and ransomware attacks.
Coin mixers essentially take cryptocurrencies like ETH and BTC from users and ‘mix’ them in order to hide the owners’ identity.
BTC to US dollar
North Korea may not be the number one any more but it is still a major player, according to a Chainalysis report published recently.
Nearly all of the remaining funds from sanctioned entities to mixers come from two groups associated with the East Asian country, Lazarus Group and Blender.io, which mixes BTC, according to the crypto research firm.
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What is a coin mixer?
Blockchain and cryptos feature a publicly visible register of all transactions, which means all transactions are traceable. Mixers are used to increase anonymity.
There might be legitimate reasons for a person to use a mixer, such as financial privacy or those who need to make legal transactions anonymously.
However, they are naturally attractive to cybercriminals as mixers rarely ask for KYC information.
How do coin mixers work?
Mixers pool together funds deposited by users and mix them together at random.
Users then receive funds back from the mixed pool equivalent to what they deposited, minus a small service fee, according to Chainalysis.
Although mixers are dominated by BTC there are a number of entities linked to ETH and other digital coins.
ETH to US dollar
Some mixers make funds more difficult to trace by allowing users to take different amounts of funds they deposited at different times and addresses.
While others try to cover up a mixer being used by changing the fee on each transaction or changing the type of deposit address.
What is a coin mixer’s weak point?
By doing so mixers create a disconnect between the crypto funds that users deposit and withdraw, making it more difficult to trace the flow of funds.
However, mixers have one key vulnerability.
Large transactions make them ineffective. But mixers function best when they have a large number of users, all of whom are mixing comparable amounts of cryptocurrency.
North Korea’s $1bn crypto hack
In 2022, hackers associated with the North Korea government, Lazarus Group to be one of them, are believed to have stolen over $1bn worth of crypto.
Blender.io was the first mixer sanctioned in 2022 for laundering funds stolen by Lazarus Group and others associated with North Korea.
Despite their utility for criminals, mixers are not illegal by their nature, but they are clarified by the Financial Crimes Enforcement Network in the US as money transmitters.
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