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The EU Innovation Hub released its first report on encryption, and it placed specific focus on the dual-use nature of cryptographic technologies. While the report praised cryptocurrencies and NFTs for their benefits, it also touched on concerns about misuse by bad actors using privacy coins and crypto mixers like Tornado Cash.
Additionally, the FTC issued a warning about the rising number of "pig butchering" romance scams involving crypto investments, after major losses were reported in the U.S. and Canada. Privacy became a focal point once again in China where a gang was sentenced for laundering money using digital yuan by exploiting its privacy features. Meanwhile, Lykke crypto exchange suffered a $22 million exploit, which led to it pausing withdrawals. In an effort to protect its citizens, Australia has banned using cryptocurrency and credit cards for online gambling to prevent overspending.
Cryptography's Double-Edged Sword
Data encryption plays a critical role in balancing individual privacy and collective security. The EU Innovation Hub, a collaborative initiative that involves members from EU agencies and member states, recently published its first report on encryption, shedding some light on the "dual-use" nature of cryptographic technologies. While the report acknowledges the positive aspects of cryptocurrencies and NFTs, which rely on public-private cryptography for storage, mining, and transfers, it also highlights concerns about their misuse by bad actors.
The report specifically points out that certain cryptocurrencies and privacy coins, like Monero, Zcash, Grin, and Dash, along with layer 2 initiatives and zero-knowledge proofs, complicate blockchain transparency. These technologies, including crypto mixing services and non-compliant crypto exchanges, make it much easier for bad actors to launder funds. Despite these challenges, the report did reveal that law enforcement authorities can still investigate these crimes if they can get access to the private keys of suspects.
Crypto hackers and scammers often use services like Tornado Cash to make it hard to trace stolen funds. Despite the noncustodial nature of Tornado Cash, its developer, Alexey Pertsev, was still found guilty of money laundering, even though funds processed through the protocol are never held or controlled by it.
The report was created by six EU Innovation Hub for Internal Security members: Europol, Eurojust, the European Commission’s Directorate-General for Migration and Home Affairs, the European Commission’s Joint Research Center, the European Council’s Counter-Terrorism Coordinator, and the European Union Agency for the Operational Management of Large-Scale IT Systems in the Area of Freedom, Security and Justice.
FTC Warns of Rising Crypto Romance Scams
While crypto mixers and privacy coins are causing issues in Europe, romance scams are also wreaking havoc. The U.S. Federal Trade Commission (FTC) recently warned consumers about the increasing prevalence of "pig butchering" scams, also known as romance scams involving crypto investments.
Originating from Southeast Asia, the term comes from the Chinese phrase "Shāz Hū Pán" and describes a scam that uses catfishing tactics to perpetrate long-term fraud. Scammers target victims on dating and social media sites, slowly building trust before exploiting them. The modus operandi usually involves creating an emotional connection with the victim, convincing the victim of their expertise in cryptocurrency investing, and ultimately stealing their money or crypto.
The agency also revealed that scammers often push victims to use gift cards, payment apps like Apple Pay, CashApp, PayPal, and Zelle, money wiring companies, or cryptocurrency.
The rise in crypto-related romance scams is also seen in Canada. In May, the Canadian Anti-Fraud Centre (CAFC) reported an increase in two specific types of crypto scams targeting Canadian citizens: pig butchering and investment scams.
One notable case involved Shreya Datta, a 37-year-old tech professional, who fell victim to a crypto romance scam and suffered losses that amounted to around $450,000. TRM Labs, a blockchain intelligence company, revealed that the FBI’s Internet Crime Complaint Center (IC3) received more 4,300 complaints related to pig butchering, with total losses exceeding $400 million.
China Sentences Gang for Digital Yuan Laundering
Meanwhile, a criminal gang in China has been sentenced for laundering money using digital yuan in an international scheme. The People’s Procuratorate of Yuecheng District, Shaoxing, found suspects Yuan, Zhang, and Kou guilty of using digital yuan accounts to conceal criminal proceeds.
The case started in August of 2023 when Yuan responded to a part-time job ad on social media, which involved cashing out digital yuan wallets for a commission. Yuan initially bought cryptocurrency as a deposit and facilitated transactions between merchants with digital yuan wallets and the advertiser, earning commissions.
Despite knowing about the money's suspicious origins, Yuan still recruited his girlfriend, Zhang, and friend, Kou, to expand the operation, offering them 50 yuan for every 10,000 yuan they helped launder. The gang moved across cities in Zhejiang province to try and avoid being detected, and ended up laundering over 200,000 yuan.
They used unregulated messaging apps to communicate with the advertiser and took advantage of the strong privacy features of digital yuan transactions.
The court sentenced the gang to imprisonment ranging from one year and four months to seven months and imposed fines for concealing and disguising the proceeds of crime. Yuan admitted that overseas fraud syndicates exploit the privacy of digital yuan transactions to buy merchants' accounts for money laundering.
Lykke Exchange Hit by $22M Exploit
Lykke crypto exchange announced that it has stopped withdrawals after suffering an exploit on Jun. 4. The exchange assured its users that their funds are safe and will be recovered. Both Lykke UK and Lykke Corp AG were affected, and withdrawals were paused as a preventative measure.
Lykke is a centralized exchange that is based in Switzerland, and calls itself a “no fee crypto exchange”. It was launched in 2025 and evolved from a forex broker.
Blockchain security researcher SomaXBT discovered the attack on Jun. 9, and ended up accusing Lykke of trying to hide the breach that resulted in the loss of $19.5 million in crypto assets. SomaXBT provided a screenshot of a Discord message from the Lykke team claiming unscheduled system maintenance.
On Jun. 8, a user complained about the exchange not working and rumors of a hack. In their Jun. 10 post, Lykke apologized to affected users, and stated that they have solid capital reserves and a diverse portfolio to cover potential losses. The exchange also claimed to have identified the attacker’s IP addresses and hired a cybersecurity team to block and recover the stolen assets. Estimates now suggest more than $22 million was lost in the attack.
Blockchain researchers continue to uncover unacknowledged exploits against centralized exchanges. On Apr. 19, ZachXBT revealed that Rain exchange was hacked for $14.1 million two weeks earlier. Rain later confirmed the attack and stated no customer funds were lost as they covered the loss from their own reserves.
Australia Bans Crypto for Online Gambling
To protect people from overspending, the Australian government has implemented a ban on using cryptocurrency and credit cards for online gambling. On Jun. 11, The Canberra Times reported that the ban covers digital currencies like Bitcoin (BTC) and credit cards linked to digital wallets. If people do not comply with this ban, they may have to face fines up to 234,750 Australian dollars ($155,000).
Kai Cantwell, CEO of Responsible Wagering Australia, supports the ban and believes it helps people control their gambling behavior. He also urged the government to extend the ban to all gambling forms to prevent people from shifting to less-regulated, riskier options.
The gambling industry received a six-month transition period before the full ban was implemented on Jun. 11, with the country’s communications watchdog now enforcing the restrictions.
The ban might not be such a bad idea considering the fact that crypto users are very well known for gambling on various outcomes, from new meme coins to regulatory decisions like the approval of spot Bitcoin and Ether ETFs. In fact, on Jan. 11, Polymarket users bet $12 million on the Bitcoin ETF decision. Additionally, in March, $2.4 million was wagered on the Ether ETF outcome.
