Bitcoin mixer CoinJoin to block all illegal UTXOs, says Wasabi Wallet

CoinJoin, a Bitcoin (BTC) mixing service that allows users to enhance anonymity and privacy of transactions by mixing multiple transactions, has announced that it will start blacklisting illicit transactions.

The blacklisting targets unspent transaction outputs, or UTXOs, the announcement noted.

Specifically, “the zkSNACKs coordinator will start refusing certain UTXOs from registering to coinjoins,” Wasabi Wallet tweeted on late Sunday.

The zkSNACKs coordinator will start refusing certain UTXOs from registering to coinjoins. pic.twitter.com/X3kBuQwieO

— Wasabi Wallet (@wasabiwallet) March 13, 2022

‘Not collaborating with authorities’

Wasabi is an open-source Bitcoin wallet focused on privacy, with CoinJoin a tool by the wallet team targeted at ensuring BTC transaction fungibility.

Using the zkSNACKs coordinator, multiple BTC transactions of similar amounts are mashed up and essentially masked so as to make it hard for blockchain tracing. In this case, criminals can easily “wash” stolen funds.

Blocking illicit or flagged transactions seeks to prevent these washing episodes, which have attracted great attention from blockchain analysis and security firms.

According to one developer associated with Wasabi and CoinJoin, pseudonymously known on Twitter as Rafe, the move to block said transactions only apply to the zkSNACKS validator. He noted in a tweeted reply that Bitcoin users can still access the mixing services via other coordinators. 

A) Its not a joke
B) No one is happy about it
C) Company has the right to exclude troublemakers
D) Coordinator code is open-source, so everyone can run it
E) Certain use cases were prohibited by T&C but it was not enough
E) Instead of demanding, improve and take over the market https://t.co/EMzFUb78wI

— Rafe 🌮⚡🔑🔦 (@BTCparadigm) March 14, 2022

He also noted that CoinJoin had not teamed up with Chainalysis to report “suspicious” UTXOs. On suggestions authorities could have “infiltrated” the services, the developer said:

“No one has infiltrated Wasabi, since we wouldn’t be having this conversation if that were the case. There’s no need to spy when banning inputs.”

Report alleged Chainalysis “unmixed” conjoined BTC

Attention on the potential use of crypto in illegal transactions has been there since the early days of Bitcoin, with recent hacks and ransomware attacks heightening this issue. Sanctions on Russia and the potential for oligarchs to attempt to evade the embargoes via crypto have also put a spotlight on the sector.

However, data and recent reports suggest cash remains the biggest channel for illicit transactions- money laundering, drug trafficking, and financing of terror. 

Chainalysis is a blockchain analytics and security firm that recently claimed to have unmasked the identity of the individual who hacked The DAO in 2016. The company allegedly did this by “unmixing” BTC transactions and tracing them to an IP address and wallet of the suspect.