Cryptocurrency and related activities are often considered a gray zone in the context of law and regulations, and coin mixers are no exception. In most countries, making purchases with crypto is not prohibited, however, there are no clear regulations, because this field is rather new. Consequently, people are often suspicious of cryptocurrencies, expecting them to be tied to some criminal or fraudulent activities. However, this is entirely untrue. Let’s look at BTC tumblers and find out how they operate and what is their relation to law.
Table of Contents
1.What Are Bitcoin Mixers?
Bitcoin mixers, also known as crypto tumblers, allow to make crypto transactions untraceable. By default, the data about each transaction is stored in the blockchain, which means it can be accessed by anyone. The data is not tied to the real identity of the users, however, blockchain analysis allows us to find out the sources of transactions or for targeting cyber-attacks. Using Bitcoin tumblers to avoid this and use Bitcoin anonymously is a basic safety measure, especially when you operate large sums of money or use crypto in some commercial activities.
All coin tumblers are based on similar principles. They receive money from multiple users and combine them into the common pool. Thus, all coins get mixed. Then the pool is split into smaller transactions which are sent out to the target addresses. As a result, even if someone wants to study transaction logs stored in the blockchain, they will see lots of smaller transactions instead of several big ones. This way, it becomes possible to transfer crypto anonymously, because it becomes impossible to trace who has sent money to which address. Most modern coin mixers also use additional obfuscation methods, so even the service itself does not know the target of each transaction.
2.Are Bitcoin Mixers Regulated?
In the world of cryptocurrency, there are not any centralized regulatory bodies, similar to National Banks or financial monitoring bodies. However, in various countries, attempts to regulate blockchain are made from time to time. Authorities are worried that bitcoin tumblers create new opportunities for money laundering, namely, to hide the source of the financial resources acquired through criminal activities.
For example, FinCEN, an organization in the US that investigates financial crimes, demanded in 2020 that all coin mixers should register via this organization and maintain KYC and anti-money laundering programs. However, most coin tumblers still do not follow these rules, because protecting the privacy of their clients is their main selling point.
There are several known cases, when coin mixers were persecuted for participating in illicit activities, such as transferring money from hacker groups or accepting transactions from sanctioned entities. In each case, what drew the eye of authorities was not the coin mixing itself, but a particular transaction or activity.
3.The Legality of Bitcoin Mixers
Currently, coin mixers are legal, because they are just a tool that can be used for various purposes. They can be compared to cash in this aspect. Similar to using crypto coins, paying with cash makes it impossible to trace where the money came from. When someone demands to pay strictly by cash, this can raise suspicions, for example, in tax evasion, but in most cases, cash payments are completely innocent and remain an essential part of our lives. Sometimes people choose cash when they do not want their purchases to be traced.
In a similar way, bitcoin mixers allow you to conduct untraceable transactions. They can be used for perfectly legal purposes, such as sending money to other people or purchasing such goods. If you are using coin tumblers for such legal activities just because you value your anonymity and privacy, you will not have any problems.
4.How to Choose a Legal Bitcoin Mixer?
For additional protection, pay attention to the reputation of the Bitcoin mixer. If a particular service presents itself as a tool to launder money acquired from criminal activities, supposing scammers or fraudsters are its target audience, it is better to stay away from such a service. Firstly, you risk losing your money because there is a higher risk for such a service to be closed by authorities sooner or later. Secondly, the service itself may turn out to be a scam.
To avoid such risks, give preference to the best Bitcoin tumblers with an established reputation. Such services do not advertise any shady activities and present themselves as a means to protect your privacy which is accessible to general users. If possible, read reviews for the service on external resources and find out how long the particular Bitcoin mixer exists. It is advised to exercise more caution while using tumblers which were created recently and do not have a lot of reviews yet.
In addition, pay attention to the technologies used to mix coins. Usually, decentralized coin mixers are a better option, because they do not store any information about their users and use several layers of encryption, making deanonymizing transactions virtually impossible.
As you see, using crypto mixers is absolutely legal, if they are not employed for some illegal activities. Such services are an essential tool for protecting your privacy, and everyone, who uses crypto, should know how to use them as well.