Surprisingly, open-source, non-custodial Bitcoin privacy wallet Wasabi is popular enough to get the attention of the European Union Agency for Law Enforcement Cooperation (Europol), the Hague-based European Union’s law enforcement agency. However, as for what the law enforcement can do about this wallet’s privacy options – it’s not good for them.
In a two-part report for the eyes of “law enforcement only,” one date April and the other May, 2020, Europol’s European Cyber Crimes Center (EC3), writes indicating that they’ve noticed an “increasing number of investigations involving Wasabi Wallet.” EC3 points out that the wallet’s use of the anonymization method for bitcoin transactions CoinJoin, Integration of TOR Software, that some anti-money laundering (AML) legislation, like the AMLD5, don’t apply to it as well as other privacy-focused features. The news was first reported by CoinDesk.
As to how popular Wasabi is, the agency says this, “certainly popular enough to spark our interest.” They further cite the data made available by blockchain and analytics specialists Chainanlysis according to which Wasabi stored keys to over BTC 110,000 (USD 1 billion). In addition, almost USD 50 million in BTC were deposited in three weekends leading to the March report, with almost 30% from the dark web. “This is a significant amount, relatively speaking, given the dark web transactions are estimated to have only 1% share of total transactions” EC3 writes.
The report further analyzes the use of the wallet in detail; it demonstrates a transaction, and looks into “the possibilities for law enforcement investigations,” prefacing it with: “Spoiler alert: things are not looking good.” Suspects who use the wallet correctly “have a very high probability of staying undetected.” Visually identifying a Wasabi transaction is possible and maybe helpful, it adds, but if a suspect is consistently making use of the mixer, the commercial tracing tools should be able to identify them. Whatever the case, they won’t demix them. Whether Wasabi transactions can be demixed, “realistically speaking, in most cases the answer is negative.” This may be possible, though, if a suspect makes a mistake and groups the mixed coins together. Perhaps, there may be ways to do so in the future: Dutch financial crimes investigation agency FIOD started “promising technical research into behavior and demixing of Wasabi transactions […].”
According to Wasabi, the technical details of the report are “dead on.” Gergely Hajdu, CEO of zkSNACKs, the company behind the Wasabi wallet, speaking to Cryptonews said, “We cannot, however, verify the data they have provided with regards to usage patterns, it is, of course, plausible, but considering the sensitivity of the matter, we would like to refrain from speculation on this and also on some of your questions that require it.” “Pleasantly acknowledged that their assessment of our legal situation is coinciding with our interpretation of various international laws, too,” he added. “We have already known that we are providing outstanding security for our users, but their confirmation is certainly reassuring,” he added.