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Chainalysis Reveals How Cyber Criminals Use Crypto Mining Pools to Hide Their Tracks



Chainalysis report

Cryptocurrency mining pools are groups of miners who share their computational resources to strengthen the probability of finding a block or otherwise successfully mining for cryptocurrency. Mining pools are essential for the security and decentralization of many cryptocurrencies, such as Bitcoin and Litecoin. However, they also pose a risk of being used for money laundering by cybercriminals who want to wash their ill-gotten funds.

A recent report by Chainalysis, a blockchain analysis company, revealed that some cybercriminals are turning to crypto mining pools to launder their stolen or illegal cryptocurrencies. The report analyzed 18 popular mining pools and found that some of them received funds from ransomware attacks, darknet markets, and other illicit sources. The report estimated that these mining pools received about $25 million worth of tainted cryptocurrency in 2023.

The process of laundering money through mining pools involves sending the dirty cryptocurrency to a pool address, where it is mixed with other funds from legitimate miners. The pool then distributes the rewards to the participants, including the launderers, who receive clean cryptocurrency in return. This way, the launderers can obscure the origin and destination of their funds, and avoid detection by law enforcement or regulators.

Chainalysis Report Points to a Flaw in the Scammers’ Plans

Chainalysis report

However, this method is not foolproof, as Chainalysis pointed out. Mining pools are not anonymous, and their transactions are recorded on the public blockchain. Therefore, it is possible to trace the flow of funds from the source to the destination and identify the pool addresses that are associated with illicit activity.

Moreover, some mining pools may have anti-money laundering (AML) policies and procedures in place and may cooperate with authorities if they detect suspicious activity.

According to Chainalysis, the best way to prevent money laundering through mining pools is to increase the transparency and accountability of the mining industry. This could include requiring mining pools to register and verify their users, implement AML controls, and report suspicious transactions.

Additionally, regulators and law enforcement agencies should monitor the activity of mining pools and enforce compliance with existing rules.

Mining pools are an important part of the cryptocurrency ecosystem, as they enable more people to participate in the network and secure it. However, they also present a challenge in combating money laundering and other financial crimes. Therefore, it is vital to balance the benefits and risks of mining pools and ensure that they operate responsibly and ethically.