Bitcoin Wallet Wasabi to block some transactions

The crypto firm behind the popular Wasabi digital wallet — which offers a service that lets users mix their Bitcoin holdings in such a way as to keep their identities private — said it will start refusing certain transactions.

In a Twitter post earlier this week, a developer of the Wasabi wallet, said the company, zkSNACKs, made the move to keep “hackers and scammers” from using the service and avoid unspecified “trouble.”  

While there was no indication of any specific incident that prompted the decision, nor was it required, regulators and law enforcement are increasingly concerned that these type of “mixing” and “tumbling” services can be used to aid illicit activities or evade the type of financial sanctions that were recently imposed on Russia after its invasion of Ukraine. Just this week, the U.K.’s crime agency called for more oversight of crypto protocols that allow users to obfuscate their transaction activities. Meanwhile, some in the crypto community argue against restrictions on these services, which they see as vital for protecting their privacy on public blockchains. 

Wasabi wallet uses a mechanism called CoinJoin to combine Bitcoin from several participants into one large transaction with multiple senders and receivers. ZkSNACKS plays a part in CoinJoin by coordinating their transactions. Because zkSNACKS is a centralized service, it has the ability to ban transactions from certain addresses going into certain CoinJoins.

Other mixing services, such as Tornado Cash —  a similar mixer protocol but for transactions on the Ethereum blockchain — operate differently. Earlier this month, a co-founder of Tornado Cash said that because the protocol is decentralized, its creators do not have any control over it other than coding and research, limiting their ability to police it.