A comprehensive report on cryptocurrencies, compiled by Europol, Eurojust and other EU institutions, provides the first in-depth look at the impact of cryptocurrencies on law enforcement.
The report notes that law enforcement has significant gaps in its ability to track and recover illicit digital assets transferred through privacy coins, layer 2 networks, and cryptocurrency mixers.
Cryptographic Security and Law Enforcement
A report released by European legal authorities pointed out that the public-private key cryptography technology relied on by cryptocurrencies brings a series of unique challenges and opportunities to law enforcement agencies. With the increasing use of cryptocurrencies in money laundering activities, it has increased the difficulty of tracking the flow of illegal funds. In particular, the development of technologies such as zero-knowledge proof (ZKP) and layer 2 (L2) networks, the enhanced privacy they provide may further hide the source and destination of funds.