EU Report Highlights Potential Misuse of Bitcoin's Lightning Network and Other Layer2 Solutions

According to PANews, a new report from the European Union (EU) has specifically pointed out that Bitcoin's Lightning Network and other Layer2 solutions could be misused by criminals as 'data obfuscation' technologies. The first crypto report released by the EU's Internal Security Innovation Center states that in addition to technologies such as Mimblewimble, zero-knowledge proofs, token mixers, and privacy coins like Monero and Zcash, 'Layer2 solutions like the Lightning Network could also be misused by criminals.' The report notes that the Lightning Network's 'dual-signature payment channels do not broadcast all transactions to the blockchain, but only broadcast the opening and closing of the channel,' adding that it and other Layer2 solutions could pose 'problems for law enforcement investigations.' The report also targeted mixers like Tornado Cash, as well as privacy coins including Monero, Zcash, Grin, and Dash. It emphasized that their use of 'zero-knowledge proofs and Layer2 solutions' makes some transaction data obscure, which 'greatly increases the complexity of law enforcement agencies tracking (illegal) cryptocurrency sources.' The encryption protocol Mimblewimble used by cryptocurrencies such as Grin, Beam, and Litecoin is considered a 'complex factor' in law enforcement's tracking of cryptocurrency transactions, although the authors of the report admit that 'transactions using Mimblewimble are not common.'