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Bitcoin mining attracts “various types of criminal actors,” Europol says
European law enforcement agency Europol has criticized crypto mining and layer-2 solutions, saying they cause “additional problems for law enforcement investigations.”
European Law Enforcement Agency Europol he criticized cryptocurrency mining AND layer-2 blockchain solutions, saying they pose “additional problems for law enforcement investigations.”
In a recent 40-page report on cryptography, the Hague-based agency highlighted how crypto mining has become an attractive method for criminals to launder illicit proceeds.
Criminal perpetrators can use mining operations to hide illicit gains, in some cases even generating further profits for criminals, Europol says, adding that suspicious activity has also been detected in mining pools, 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 earnings through pool mining, while these pools did not actually exist; the defrauded investors lost hundreds of millions of euros.”
Europol
However, cryptocurrency mining alone is not the only threat Europol sees in the cryptocurrency sector. Europol also expressed concern about the broader cryptocurrency landscape, highlighting that the growing use of zero-knowledge proofs and layer 2 applications on blockchain could complicate the tracing of funds.
The agency warned that these technologies “could cause additional challenges to law enforcement investigations,” though it did not specify the exact challenges these scaling technologies could introduce.
Furthermore, the report acknowledges that the task of recovering a criminal’s wallet could be “significantly complicated” due to the SLIP39 standard, commonly known as Shamir Backup. This standard, used by hardware crypto wallets, allows for the creation of multiple recovery shares instead of a single mnemonic phrase. Each recovery share is made up of 20 words, and a user-defined number of these shares are needed to restore a wallet, adding an extra layer of complexity for law enforcement, Europol says.