{"id":10648,"date":"2022-03-17T15:44:32","date_gmt":"2022-03-17T15:44:32","guid":{"rendered":"http:\/\/ci029c61271000272a"},"modified":"2022-03-17T15:44:32","modified_gmt":"2022-03-17T15:44:32","slug":"wasabi-wallet-explains-new-bitcoin-censorship","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/wasabi-wallet-explains-new-bitcoin-censorship","title":{"rendered":"Wasabi Wallet Parent Company Explains Decision To Censor Bitcoin Transactions"},"content":{"rendered":"
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Privacy-focused Bitcoin wallet Wasabi Wallet announced on Sunday it would start preventing certain unspent transaction outputs (UTXOs) from joining its CoinJoin rounds, sparking surprise<\/a> and rebellion<\/a> on Twitter as users wondered why the project would make a decision supposedly contrarian to the uncensorable ethos of Bitcoin.<\/p>\n

However, the decision will only be enforced by Wasabi\u2019s default coordinator<\/a>, a centralized entity tasked with<\/a> building the CoinJoin transaction with the inputs provided by Wasabi users that is run by the company behind the Wasabi project, zkSNACKs.<\/p>\n

\u201cThe zkSNACKs coordinator will start refusing certain UTXOs from registering to coinjoins,\u201d Wasabi tweeted<\/a> on Sunday.<\/p>\n

The surprising move led many to believe<\/a> that some regulatory pressure must have been applied to compel the company to take such an unpopular route.<\/p>\n

However, zkSNACKs co-founder and CEO B\u00e1lint Harmat told Bitcoin Magazine <\/em>that the decision to prevent some users from leveraging Wasabi for their privacy needs was a proactive one as there is no current legislation obliging them to do so.<\/p>\n

\u201cPeople started to identify Wasabi with illicit activities and actors, and we wanted to differentiate ourselves from these players in the space,\u201d Harmat said, adding that the route taken on Sunday was zkSNACKs\u2019 solution to enforce it.<\/p>\n

Harmat explained that the company doesn\u2019t want to be associated with criminal activity of any kind, adding that multiple reports over the past year linking hackers, money launderers and other nefarious actors with Wasabi and zkSNACKs have in part prompted the move as such an angle hurts the brand\u2019s image.<\/p>\n

\u201cWe were always against using [CoinJoin] for illicit activities, and as far as we could see from the news, lots of actors started to take advantage of the software,\u201d Harmat said. \u201cAnd this created really bad press for us.\u201d<\/p>\n

\u201cWasabi is for people to preserve their privacy, and not for hiding illicit activities,\u201d he added. <\/p>\n

zkSNACKs<\/a> is the legal entity behind Wasabi Wallet. Adam Ficsor, Gergely Hajd\u00fa and Harmat built the company as Wasabi began to grow, Harmat explained, to facilitate hiring people and growing it even further.<\/p>\n

\u201cWe expected this project to grow, and it is currently,\u201d Harmat said. \u201cWe expected lots of people [to be] coming around, working for us, and to be able to pay them and engage with them, we believe it is important and necessary to have a legal entity. And in the long term, this is probably the basis of a growing business.\u201d<\/p>\n

While much of the media coverage on CoinJoin has focused on illegal uses<\/a>, Harmat said he expects the tide to turn as Wasabi highlights how the practice can be beneficial for regular Bitcoin users.<\/p>\n

But zkSNACKs\u2019 self-preserving move has cast doubt on the company\u2019s motives as consumers struggle to understand the reasoning for this censoring, given that its coordinator doesn\u2019t fall into a \u201cmoney transmitter\u201d regulatory category. The choice could serve as a long-term insurance, however, as Harmat explained that he sees the development of targeted regulation as only a matter of time.<\/p>\n

\u201cWe did our research and really went into the legal details,\u201d Harmat said. \u201cThere are no current regulations on ongoing joint coordinators. However, I\u2019m aware this is going to change in the future.\u201d<\/p>\n

The Financial Times<\/em> reported earlier this week<\/a> that the U.K.\u2019s National Crime Agency (NCA) had called for the regulation of CoinJoin, which it calls \u201cdecentralized crypto mixers,\u201d as it alleges such a tool is leveraged by criminals to avoid detection when laundering money through Bitcoin.<\/p>\n

\u201cThey can be used to provide a \u2018layering\u2019 service, churning criminal cash, obscuring its origins and audit trail, similar to how a cash business might be used by criminals to legitimise cash through the banking system,\u201d Gary Cathcart, head of financial investigation at NCA, told FT<\/em>.<\/p>\n

Harmat commented on the news, telling FT<\/em> that NCA\u2019s claims, along with similar arguments highlighted in the report by Europol as well as chain analysis company Elliptic, did not \u201ccorrespond to reality,\u201d adding that zkSNACKs is \u201cjust a team of developers and economists who are working hard for a better future.\u201d<\/p>\n

Contrary to popular belief<\/a>, CoinJoin is not a mixing service and it is not custodial. Rather, it is a collaborative Bitcoin transaction<\/a> where different people trustlessly contribute inputs in an effort to break heuristic links their funds could have as they made their way through the Bitcoin blockchain in the past. There is therefore no money transmitter involved.<\/p>\n

\u201cCoinJoin coordinators are simply message parsers,\u201d Samourai Wallet, another privacy-focused Bitcoin wallet with built-in CoinJoin, tweeted<\/a> Monday. \u201cThey are not money transmitters, they are not facilitators they simply pass data packets to connected clients. Clients never surrender custody to any 3rd party. Clients collaborate w\/ each other.\u201d<\/p>\n

But even though zkSNACKs\u2019 coordinator will start censoring some UTXOs when building CoinJoin rounds, users can in theory opt to use Wasabi Wallet\u2019s privacy feature with another coordinator. However, currently \u201cthere is no such \u2018settings\u2019 like solution,\u201d Harmat said, adding that users need to modify the configuration file to connect with a different coordinator<\/a>.<\/p>\n

\u201cWe haven\u2019t been thinking about implementing a new user interface for switching the coordinator,\u201d Harmat said, when asked if Wasabi would take proactive steps to ensure a more straightforward way for users to choose a different coordinator. \u201cObviously the whole project is open, anyone is free to do whatever they want to do with it.\u201d<\/p>\n

zkSNACKs co-founder Adam Ficsor posted a message<\/a> on the Wasabi Wallet public Telegram channel on Tuesday saying that the company will \u201chave to hire\u201d a blockchain analysis firm \u201cand filter out CoinJoin input registrations with them\u201d \u2014 a plan that Harmat echoed.<\/p>\n

However, zkSNACKs doesn\u2019t currently have a clear-cut notion of which specific transactions should be censored as it hasn\u2019t yet laid out a detailed plan as to how it will choose which UTXOs to block, Harmat explained, but the broader aim is \u201cto screen out these illicit types of activities.\u201d<\/p>\n

A proactive step to preserve the company\u2019s legal wellbeing makes sense in the business industry as managers have to take difficult decisions to ensure a prosperous future for the firm and its employees. However, it isn\u2019t clear why this proactiveness was necessary in zkSNACKs\u2019 specific case, as a CoinJoin coordinator cannot be equated to a money transmitter \u2014 a designation that can be seen as the holy grail of regulatory pressure, where intense regulation exists and violators are heavily prosecuted<\/a>.<\/p>\n

Therefore, even though zkSNACKs\u2019 recent move can be seen as one of self preservation, it arguably legitimizes regulatory overreach by watchdogs who don\u2019t yet understand what CoinJoin really is and are instead attempting to apply rules that don\u2019t fit \u2014 ultimately encouraging such regulatory practice and inviting even more overreach to come, which would hardly be beneficial over the long run.<\/p>\n

UPDATE (March 17, 2022 \u2013 7:42 PM UTC): <\/strong>Clarifies user action needed for using different coordinator and adds link to an alternative coordinator on 20th paragraph.<\/em><\/p>\n

UPDATE (March 28, 2022 \u2013 8:43 PM UTC):<\/strong> zkSNACKs has released a statement<\/a> on its website concerning its decision to blacklist UTXOs.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

zkSNACKs, the company behind the privacy-focused Wasabi Wallet, explained its decision to censor certain Bitcoin UTXOs from using its CoinJoin service.<\/p>\n","protected":false},"author":2572,"featured_media":10649,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[292,291,422,1626,1381,1350],"class_list":{"0":"post-10648","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-censorship","9":"tag-coinjoin","10":"tag-feature","11":"tag-wasabi","12":"tag-wasabi-wallet","13":"tag-zksnacks"},"author_data":{"id":2572,"name":"Namcios","nicename":"namcios","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/pfp-96x96.png"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/wasabi-wallet-20-announced-for-bitcoin-privacy.png","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/10648","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/2572"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=10648"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/10648\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/10649"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=10648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=10648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=10648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}