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Experts from the EU government assessed the equilibrium between security and privacy within the Web3 sector and determined that the enhanced privacy offered by certain cryptocurrency technologies complicates regulatory efforts and necessitates improved law enforcement capabilities.
The EU Innovation Hub for Internal Security released a report analyzing cryptographic technologies concerning the balance of privacy and security in their application. The authors stress the significance of safeguarding personal data and essential user rights while also facilitating the battle against organized crime and terrorism within a legal framework.
Researchers indicate that crypto mixers, privacy tokens, and other privacy-enhancing blockchain technologies create challenges for the regulation of digital assets overall. The issue arises from the fact that malicious entities actively exploit such technologies to obscure their on-chain activities.
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The researchers pointed out several privacy-focused cryptocurrencies in this context: Monero (XMR), Zcash (ZEC), Grin (GRIN), and Dash (DASH). They also highlighted the regulatory challenges associated with Layer 2 protocols, which utilize Zero-Knowledge Proof (ZKP) and MimbleWimble technologies. Furthermore, the document mentions the adverse effects of crypto mixers and exchanges, whose operations do not comply with European legislation.
The primary recommendations from the researchers include:
- establishing legal measures to obtain lawful access to cryptographically secured data and the capacity to utilize it in legal proceedings;
- partnering with academic institutions and private sector entities to develop new tools that can assist in investigative efforts without jeopardizing the overall security of communications;
- advancing post-quantum cryptography protocols;
- leveraging artificial intelligence in combating organized crime;
- investigating and monitoring technologies that incorporate cryptography in their operations, particularly advancements in telecommunications, biometrics, DNS, blockchain, and quantum computing.
European law enforcement agencies began to actively counter the operations of crypto mixers in late 2022 when one of the developers of the Tornado Cash protocol was apprehended in the Netherlands during a collaborative operation with the U.S. Department of Justice. Subsequently, in March 2023, Europol agents confiscated the servers of ChipMixer, effectively ceasing its operations.
Сообщение Crypto Mixers and Privacy Tokens Complicate Web3 Industry Regulation появились сначала на CoinsPaid Media.
