In a new report, the EU Innovation Center criticizes privacy coins and crypto-mixers

Data encryption helps balance individual privacy and collective security. However, encryption protocols may face an uphill battle for legal acceptance in Europe.

The EU Innovation Hub, a collaborative initiative involving members from EU agencies and member states, has published its first report on encryption. The report emphasized the “dual use” nature of cryptographic technologies.

Good and bad in crypto

The report advocates for storage, mining and transfers in public-private cryptography and non-fungible tokens (NFT). However, some bad actors can hide the system from law enforcement, especially the visibility of protocols and privacy coins on the blockchain.

The EU Innovation Center has called for the creation of layer 2 initiatives, zero-knowledge proofs, crypto-mixing services and decentralized cryptocurrencies such as Monero (XMR), Zcash (ZEC), Grin (GRIN) and Dash (DASH). It's easy for bad actors to launder money. And so he said.

“Mixers and privacy coins have been complicating search for years, but Mimblemble and zero-knowledge proofs are relatively new developments.

Solve hidden paths

Crypto hackers and fraudsters also try to prevent the traceability of stolen funds through services like Tornado Cash. However, law enforcement can track such transactions:

“All these developments can still be investigated by law enforcement authorities when it is possible to obtain the suspect's private keys.”

The report was created by six members of the EU Innovation Center for Internal Security: Europol, Eurojust, the European Commission's Directorate-General for Migration and Home Affairs, the European Commission's Joint Research Centre, the Council of Europe's Counter-Terrorism Coordinator and the EU Agency for Freedom, Security and Justice in the Area of ​​Large-Scale IT Systems Operations Management.

RELATED: North Korea Uses Tornado Funds to Hack HTX's $147.5M Heist: UN

Alexey Persev, developer of the cryptocurrency mixing protocol Tornado Cash, was found guilty of money laundering in May, which had serious implications for open source code developers.

The penalty was incurred even though Tornado Cash is a non-custodial crypto mixing protocol, meaning that funds transferred through the protocol are never captured or monitored.

In the midst of a fight with law enforcement, Persev, a cross-chain bridge exploit, recently used Tornado Cash to steal $47.7 million in stolen funds.

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