The Crypto Tumble


May 9, 2023

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The more cryptocurrencies are in demand, the more tools emerge. All these tools have a specific use. Some make transactions easier for users while others add more privacy. Whenever a new tool emerges or becomes popular, the most common question is whether it is legal to use it or not.

A not-so-new tool is in the eye of the storm for this very reason — We are talking about the "tumbler."

Tumblers have recently caught people's attention. But what is a "tumbler," and how does it work?

What's a Tumbler?

To understand what tumblers are, we must first understand how the blockchain works.

The blockchain is an open-source ledger. Anyone with the necessary knowledge can analyze it. This analysis can lead someone to discover who is behind a wallet.

The fact is that bitcoin is not anonymous, it is pseudonymous. Although your wallet does not have a name written on it, people can see your movements if they know your address.

As expected, many users do not like this. And this is where tumblers arise.

Tumblers, or mixers, mix different streams of potentially recognizable digital currency. Their purpose is to enhance the fundamental nature of swaps by making BTC harder to track.

Tumblers disrupt the connection between BTC and its users. Once users start tumbling their BTC, it is more difficult to access their data.

The cost of these services ranges from 0.25% to 3% of the total sum. At the end of the process, there is no link between the initial coin and the final product.

There are many other tumblers — not only BTC can be tumbled. All tumblers work similarly: they combine many trades to make it difficult to trace the origin of the coins.

Is Tumbling Illegal?

Cryptocurrency tumblers allow retailers to rewrite their crypto history. Bitcoin is no longer as traceable as it once was. For this reason, some people have linked tumbling to criminal activities. People could use tumbling to evade taxes or launder money.

Yet, according to Rance Masheck, CEO of iVest+, there is nothing illegal about this method. In fact, he claims that this process is not as offensive as it sounds.

According to Mascheck, it is the same as having cash. You can buy a TV from your friend with cash, and then that person buys a set of tools. The latter person can do something illegal, and that wouldn't involve you in any way.

There is no way to know how the cash got from the first person to the last person in the chain. With bitcoin, that story exists, but the goal of tumbling would be to get rid of it for a cleaner BTC.

But not everyone believes the same thing. That is the case of Tony Perkins, founder of Elephant Money. According to Perkins, tumbling is a big problem for the crypto market.

Perkins claims one of the benefits of the blockchain is that the ledger keeps a running history of what has happened. Tumblers give criminals the ability to cover their illicit tracks. Perkins also believes that there's no need to blur the truth if people act legitimately.

Is Tumbling Regulated?

Although there are divided opinions on tumbling, there is still no regulation. It is not illegal to tumble bitcoin to erase its past and extend its protection.

Yet, the popularity that this tool has gained can be dangerous. It will not be surprising if internationally sanctioned individuals use this tool.

The whole purpose of tumbling is to hide the origin of crypto assets. This would allow many companies to operate in war zones or blocked countries. Yet, adoption has not reached such a high point for crypto to replace cash for these activities.

However, it is only a matter of time before regulators start looking in that direction. If that happens, governments could investigate those suspected of doing business with sanctioned people.

In short, tumblers are tools to erase cryptocurrency transaction history. They make it even more challenging to track the trajectory of these coins.

There is no law regulating these tools, making them more likely to be used for criminal activities. Yet, we will continue to hear about them before there is serious regulation for a long time.

Cryptocurrencies would have to be regulated first, and that is a titanic task. For now, tumbling is free of regulatory risk.