This is the big question here: How do you know the coins are stolen?

If you want to know that, then you need to integrate an AML checking chain analysis tool into your mixer. If there is no such check, then even well known stolen coins can't be frozen.

You could of course integrate a "rudimentary" check, like a blacklist of well known stolen UTXOs. But then the thief can just move around the coins a bit and circunvent the blacklist. So you need at least a tool that analyzes the coins' trajectory in real time, and thus most mixers would install a full fledged AML tool.

I have outlined a possible "ethical mixer" protocol here. The idea is to integrate an AML chain analysis tool but allow the user to check the coins in advance.

I hadn't seen that proposal, but I really like the approach. In particular, I've always thought that the principle behind the Banking Secrecy Act (BSA) passed in the 1970s, which puts a $10,000 limit on physical cash deposits into banks before they are reported to the authorities, is a really good framework.

This always made a lot of sense to me since it coincides with how reasonable and honest people want to operate. There are very strong reasons--safety and privacy--to use cash (or the internet equivalent) for "small" amounts. For "large" amounts, however, there aren't, realistically, any "good" reasons to want total privacy (unless you have a business that deals in cash for instance). And there's a big difference between "privacy" from hackers, fellow citizens, marketers, and so forth--and "privacy" from a government with a validated inquiry (viz. probable cause).

I've talked about the "paradox" of privacy here before: that normal honest people want anonymity for "small" money and identity for "big" money. You want to pay for things under $100 with physical cash, but most law-abiding individuals want to hold things like their house, their car, and their life savings in their name so they don't have to physically guard it themselves. There are a lot of reasons to more and keep large amounts of money anonymously, but they are basically all... criminal reasons (even if the definition of "criminal" can be unjust in your country).

Bitcoin has always gotten this paradox exactly backwards: for large amounts, you can work to make it anonymous (e.g. with mixers and other tradecraft), but for most average people moving small amounts around for convenience, Bitcoin is absolutely not private at all, and dangerous.

As far as morality is concerned, I don't think there's any dilemma at all. Helping a thief get away with stolen money or his/her crime is morally wrong, plain and simple.

None of the arguments in favor of mixing in the OP is founded on moral grounds.

But this isn't just about morality. For instance, should there be a level of certainty before mixers reasonably decline a client or his/her money, or even seize it? Or why should a mixer discriminate? Isn't that considered a betrayal of its very function? Since it's mainly a privacy tool, shouldn't it wear a blindfold so to speak and serve all its clients equally?

For me, mixers, and everybody for that matter, being part of the larger society, should do what's good and right. However, services should be offered in good faith or with the presumption of regularity. Unless there's more or less absolute certainty that a deposit is stolen, everything should proceed. Mere suspicions, indirect links, and the like shouldn't be grounds for rejection.

However, being realistic at the same time, I think there should also be thresholds. One can't just move a hundred million around as if it carries the same weight as a grand. The reality is that there are indeed exploitations.

mixers do not have the same regulations as exchanges, they are not registered because that's the only way they can promote privacy. So how would the mixers know that the coins are stolen and will they really investigate? I think mixers operate in a simple way, they cater to people without knowing where the coins came from ( and would not care), and process the transactions based on their system.

So it's hard to bring mixers into this mess, unless the government tells them to trace those coins and stop helping with money laundering, that is when they might have to cooperate, but in most cases when stolen coins go to mixers, the mixers themselves could also face sanctions  and could be frozen by authorities.

What's the essence of using a mixing service when they would freeze your coins. Mixers are to cover your transaction tracks for privacy and that is why Mixing services wouldn't bother to check anything but mix your coins for you and get paid so that, they can have more customers and keep the ones they already have.

People are using mixers every day so how will they know that the coins from this address is tainted or not. What if the thief didn't use mixer directly after stealing but converted it to monero and move it across three or more decentralized exchange before sending it to a mixer which send the coins to his final address.

Anyone or group that hack an exchange has already made ways on how to move the stolen funds without any trace because it's only when the funds are in his possession without any trace that he has successfully stolen the coins. Don't you know that how to move the coins is also part of the plan before the hack will take place.

I’d go a step further. The OP doesn’t specify this, but if you’re the hacker, the logical thing to do would be to mix the coins once they’ve been stolen. I don’t think the OP is considering that scenario; they’re considering the scenario where you receive coins from the hack in a transaction. But normally, not 100 per cent of them will be from the theft. If you carry out an analysis and find that a high percentage of them could be flagged and frozen by a service you’re going to use, it would make sense to mix them again.

But the scenario where you receive a transaction and 100 per cent of the amount comes from the Binance hack seems unlikely to me.

If I'm the mixer then I will surely return the coins especially if I know they are coming from a hacked exchange.
The risk is just too high to let it proceed as that might mean I participated in the crime. I have to remember that the main purpose of the business is to provide privacy, not to help criminals, that's two different things.

Lastly, this is a popular case, governments are already involved, and you cannot fight the government as they have all the resources.



I would rather choose this that  being penalized than or worst put in jail.

This mixer in 2020 was penalized $60 million for a money laundering related case, a business could not afford that.

Those hackers are smart enough to steal that money, so they will likely use many mixers to avoid being detected especially if there's a sudden increase in volume on a certain mixer. In  an hour,  more or less, an exchange would already detect if there's crypto that was hacked, and if it's a big exchange it would already be all over the news, so mixers would probably look for some abnormal volume and possibly hold the funds if they have to. But we can only speculate here since mixers in the first place are not regulated, so they are not bound to follow what a legitimate business would normally do, and not sure if they will cooperate with authorities.

The main purpose of a mixer is to protect users' privacy. For customers to trust these services, analysing individual UTXOs in this way would go against what mixing services are meant to achieve. We have seen several mixing platforms and exchanges get penalised because of their links to tainted UTXOs, simply for providing services to them. If they had known the origin of those transactions, they might have been able to avoid dealing with them in the first place.

Someone mentioned using a blacklist of addresses, but I was also thinking about how much time it would take for their systems to analyse transactions and trace their history. Since most mixing services are automated, this would mean carrying out these checks on every single transaction before mixing it. That could make the entire process more complicated and time consuming.