European law enforcement agency Europol has criticized cryptocurrency mining as well as Layer 2 solutions, saying they cause “additional problems for law enforcement investigations.”
European law enforcement agency Europol has criticized cryptocurrency mining and second-tier blockchain solutions, stressing that they pose “additional problems for law enforcement investigations.”
in A recent 40-page report Regarding cryptocurrencies, the Hague-based agency highlighted how cryptocurrency mining has become an attractive way for criminals to launder illicit proceeds.
Criminal actors can use mining operations to hide illicit profits, and in some cases generate more profits for criminals, Europol says, adding that suspicious activity has been detected in mining pools as well, particularly those exploited by ransomware operators.
“(…) Pool mining schemes have also been used by scammers to run their Ponzi schemes. For example, the BitClub network promised profits by mining pools, when such pools did not actually exist; defrauded investors lost hundreds Millions of euros.”
Europol
However, cryptocurrency mining alone is not the only threat Europol sees to the cryptocurrency industry. Europol also raised concerns about the broader cryptocurrency landscape, stressing that the increasing use of zero-knowledge proof and layer-two applications on the blockchain could complicate the process of tracking funds.
The agency warned that these technologies “may cause additional problems for law enforcement investigations,” though it did not specify the exact challenges these scaling technologies might pose.
Furthermore, the report acknowledged that the task of recovering a criminal's wallet could be “significantly complicated” due to the SLIP39 standard, known as Shamir Backup. This standard, used by hardware crypto wallets, allows multiple recovery shares to be created instead of a single mnemonic phrase. Each recovery post consists of 20 words, and a user-specified number of such posts are required to recover the wallet, adding another layer of complexity for law enforcement, Europol claims.
