Risks of Bitcoin's Lightning Network and Privacy Coins for Criminal Activity

• EU report identifies Lightning Network as potential tool for criminal activity.
• Privacy coins like Monero and Zcash under regulatory scrutiny.
• Tornado Cash developer convicted of money laundering by Dutch court.
• Crypto mixers and layer 2 solutions complicate tracing illicit transactions.
• EU Innovation Hub highlights challenges in balancing privacy and security in crypto.
• Law enforcement faces obstacles in tracking cryptocurrency transactions.

Summary :
A new report from the EU Innovation Hub for Internal Security warns that Bitcoin's Lightning Network and other layer 2 solutions could be used by criminals for "data obfuscation." The report also targets privacy coins like Monero and Zcash, as well as coin mixers such as Tornado Cash, for making it difficult for law enforcement to trace illicit cryptocurrency transactions. In a separate case, Alexey Pertsev, the developer of Ethereum mixer Tornado Cash, has been found guilty of money laundering by a Dutch court and sentenced to 64 months in prison. Privacy coins and crypto mixers have faced regulatory pressure in recent months, with the EU's Markets in Crypto Assets (MiCA) framework cracking down on their interactions with crypto-asset service providers. This report highlights the ongoing tension between individual privacy and collective security in the cryptocurrency space.

Sources :

- Decrypt
- CoinTelegraph