A cryptocurrency tumbler or cryptocurrency mixing service is a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. This is usually done by pooling together source funds from multiple inputs for a large and random period of time, and then spitting them back out to destination addresses. As all the funds are lumped together and then distributed at random times, it is very difficult to trace exact coins. Tumblers have arisen to improve the anonymity of cryptocurrencies, usually bitcoin (hence bitcoin mixer), since the currencies provide a public

ledger A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending or ...

of all transactions. Due to its goal of anonymity, tumblers have been used to

money launder Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions ...

cryptocurrency.

Background

Tumblers take a percentage transaction fee of the total coins mixed to turn a profit, typically 1–3%. Mixing helps protect privacy and can also be used for money laundering by mixing illegally obtained funds. Mixing large amounts of money may be illegal, being in violation of anti-structuring laws.

Financial crimes Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud (cheque fraud, credit card f ...

author

Jeffrey Robinson Jeffrey Robinson (born October 19, 1945) is an American author of 30 books. Early life Born in Long Beach, New York, Robinson is a graduate of Temple University in Philadelphia (1967). While still at school, he wrote for television and radio, ...

has suggested tumblers should be criminalized due to their potential use in illegal activities, specifically funding

terrorism Terrorism, in its broadest sense, is the use of criminal violence to provoke a state of terror or fear, mostly with the intention to achieve political or religious aims. The term is used in this regard primarily to refer to intentional violen ...

; however, a report from the CTC suggests such use in terrorism-related activities is "relatively limited". There has been at least one incident where an

exchange Exchange may refer to: Physics *Gas exchange is the movement of oxygen and carbon dioxide molecules from a region of higher concentration to a region of lower concentration. Places United States * Exchange, Indiana, an unincorporated community * ...

has blacklisted "tainted" deposits descending from stolen bitcoins. The existence of tumblers has made the anonymous use of darknet markets easier and the job of law enforcement harder.

Peer-to-peer tumblers

Peer-to-peer Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer ...

tumblers act as a place of meeting for bitcoin users, instead of taking bitcoins for mixing. Users arrange mixing by themselves. This model solves the problem of stealing, as there is no middleman. When it is completely formed, the exchange of bitcoins between the participants begins. Apart from mixing server, none of the participants can know the connection between the incoming and outgoing addresses of coins.

Privacy wallets

Another alternative to mixing services are "privacy wallets", allowing users to exchange bitcoin in an untraceable manner using so-called CoinJoin transactions. Since no central server is involved, this eliminates the problem of a mixing server stealing money or acting as a law enforcement honeypot. In recent years, criminals have increasingly moved from mixing services to privacy wallets.

Money laundering

In December 2013 cryptocurrency tumbler Bitcoin Fog was used to launder a part of the 96,000 BTC from the robbery of Sheep Marketplace. In February 2015, a total of 7,170 Bitcoin was stolen from the Chinese

Bter.com and traced back to the same tumbler. In May 2019,

FinCEN The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terr ...

published a Guidance document that mentioned anonymizing services and mentioned particularly "tumblers". In February 2020, the alleged operator of a cryptocurrency tumbler was indicted on charges of "money laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. license." In April 2021, U.S. Federal authorities arrested the founder of Bitcoin Fog, a Russian-Swedish man named Roman Sterlingov, on charges of money laundering, operating an unlicensed money transmitting business, and money transmission without a license in the District of Columbia. It was alleged that during its 10 years of operation, Bitcoin Fog laundered over 1.2 million Bitcoin at a value of approximately $335 million. In 2022 the tumblers Blender.io and Tornado Cash were both sanctioned by the

United States Department of the Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...

, making it illegal for US citizens, residents and companies to use the service.

References

{{Cryptocurrencies, state=expanded * Privacy Money laundering

Background

Peer-to-peer tumblers

Privacy wallets

Money laundering

See also

References