The cryptocurrency exchange Kraken recently announced the delisting of #Monero from the European Economic Area to comply with EU regulations. This decision comes amid discussions on how to combat #moneylaundering on blockchain networks, particularly those that prioritize privacy.
Proposals for Attacks on Blockchains
An academic paper titled “Reconciling Anti-Money Laundering Tools and European Data Protection Requirements in Permissionless Blockchain Spaces,” published in the Journal of #cybersecurity , recommends that governments target cryptocurrencies, especially privacy-focused blockchains, as a way to fight money laundering.
The author suggests several methods to undermine trust in public blockchains, including 51% #Attacks , price suppression, and Sybil attacks, where one user creates multiple fake accounts to manipulate the network. The author explains:
"Successful attacks on blockchain networks could significantly erode users' trust and question the network's ability to ensure secure and smooth operation."
Attacks as a Last Resort
However, the paper emphasizes that these drastic measures should only be used as a “last resort” after other policy initiatives have been exhausted, such as blacklisting wallet addresses, flagging transactions, sanctions, or additional regulations. Any approach taken should strive to balance regulatory compliance, fostering innovation, and protecting individual user privacy.
Renewed Interest in the Paper
Although this paper was published in 2021, it has gained renewed attention as some users speculate that similar tactics are currently being used to manipulate the price of Monero, a privacy-focused cryptocurrency mentioned in the academic work.
#Cryptocurrencies and Terrorism Financing
According to the United Nations, terrorist organizations predominantly use cash to fund illegal activities. This finding was confirmed by a report from the U.S. Treasury, which revealed that criminal organizations prefer fiat currency over cryptocurrencies.
The U.S. Treasury's May 2024 report also acknowledged that while digital assets have been used in illegal activities, they tend to support longstanding schemes that could have been executed using cash or other asset classes.
Government Crackdown on Privacy Tools
Despite these findings, the U.S. government has continued to take action against cryptocurrency mixers and other privacy-enhancing tools. On September 26, 2024, a judge ruled that the case against Tornado Cash co-founder Roman Storm could proceed.
These actions have sparked debates about the viability of privacy-enhancing services, as many users wonder if cryptocurrency mixers can survive under the current regulatory regime.
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