European law enforcement agency Europol has sounded the alarm on crypto mining and layer-2 blockchain solutions, flagging them as potential hurdles for law enforcement investigations. In a comprehensive 40-page report on cryptographic encryption, the agency based in The Hague highlighted how these technologies have become attractive avenues for criminals, particularly in money laundering schemes.

According to Europol, crypto mining has emerged as a favored method for criminals to obscure illicit proceeds. By leveraging mining operations, criminals can effectively launder their earnings, sometimes even generating additional profits. The report also points out suspicious activity observed in mining pools, notably those exploited by ransomware operators, underscoring the multifaceted risks associated with crypto mining.

Europol further highlighted instances where mining schemes have been utilized by scammers to perpetrate Ponzi schemes, citing the notorious case of the BitClub Network, which promised earnings through non-existent mining pools, resulting in significant financial losses for investors.

However, Europol's concerns extend beyond crypto mining alone. The agency also raised apprehensions about the broader cryptocurrency landscape, particularly regarding the increasing adoption of zero-knowledge proofs and layer-2 applications on the blockchain. Europol warned that these technologies could introduce complexities in tracing funds, potentially impeding law enforcement investigations.

Moreover, the report acknowledged the challenges posed by the SLIP39 standard, commonly known as Shamir Backup, utilized by hardware crypto wallets. This standard enables the creation of multiple recovery shares instead of a single mnemonic phrase, complicating the task of recovering a criminal's wallet significantly. Europol emphasized that the proliferation of such advanced encryption standards adds another layer of complexity for law enforcement agencies seeking to combat crypto-related crimes.