Privacy wallets like Wasabi Wallet are rapidly replacing cryptocurrency mixers as the preferred tool for concealing undeclared crypto funds
The use of privacy-focused wallets by criminals has risen sharply this year, according to a recent analysis released by blockchain analytics firm Elliptic. Their research shows that while just 2% of illicit bitcoin proceeds passed through privacy wallets in 2019, that share grew by at least 13% in 2020, accounting for the laundering of over $160 million derived from scams, thefts and black‑market activity.
Evidence of this increase has appeared in several headline cases this year: the July Twitter scam, in which 130 high-profile accounts were compromised and attackers collected more than $110,000; and the September breach of Singapore exchange KuCoin, which resulted in roughly $280 million worth of crypto assets being stolen.
In both incidents, stolen funds were later routed through Wasabi Wallet, an open-source, privacy-centric wallet that facilitates CoinJoin transactions. CoinJoin is a technique that merges multiple bitcoin payments from different senders into a single transaction to obfuscate which sender paid which recipient. Wasabi Wallet streamlines this process by coordinating and building the combined transactions for users.
Bitcoin laundering itself is not new. Because blockchain transaction records are public and immutable, privacy can be compromised through IP address monitoring, contamination analysis, payment tracing, web‑spidering and other investigative techniques. Criminals therefore continually seek methods to hide crypto trails from law enforcement and blockchain investigators.
Historically, many offenders relied on mixers or tumblers—services that break the link between coins and their owners by pooling and redistributing bitcoin from multiple users in exchange for a fee, typically between 0.5% and 5%. To date, more than $2 billion in bitcoin has flowed through such mixing services.
Using mixers carries significant risks: operators can abscond with deposited funds, or a service may be a law‑enforcement sting. Regulators have increasingly targeted these platforms. For example, the bitcoin mixer Helix was fined $60 million in October for violating anti‑money‑laundering laws and Bank Secrecy Act requirements.
Given these risks and increased regulatory scrutiny, it is unsurprising that criminals have shifted away from mixers toward privacy wallets in recent years. This shift presents a constantly evolving challenge for law enforcement, financial regulators and compliance professionals working to combat financial crime in the crypto sector.