Following the CoinJoin controversy, in which a user attempted to apply the tool to his transactions to make them more anonymous, the investor successfully withdrew his assets after promising not to use the tool in the future. The event sparked quite a debacle for Binance and some enthusiasts on Crypto Twitter were even appalled by the exchange’s reaction to the problem.
Users who apply CoinJoin, a cryptocurrency privacy tool that allows users to make their bitcoin transactions anonymous, may have their transactions frozen on exchanges such as Binance. According to the experiences of a Twitter user named Catxolotl, available publicly in his posts published on Thursday, the newly launched Binance Singapore exchange denied his withdrawal request and launched an investigation that would track the attempt of withdrawing an unknown amount of BTC.
The cryptocurrency investor in question attempted to withdraw an unknown amount of BTC to a Wasabi wallet using the CoinJoin tool, however, a representative from Binance stated that the attempt is quite problematic for the exchange. Exchanged in a private message, the representative stated the following:
“Binance SG operates under the requirements as set forth by MAS and our MAS regulated partner, Xfers. Hence there are AML CFT controls set in place for the Binance SG. Unfortunately, this user has triggered one of our risk control mechanisms and thus we are conducting a deeper investigation.”
Additionally, the CEO of Binance Changpeng Zhao released an official comment on the matter, saying that government regulations concerning cryptocurrencies prevent the Singapore region exchange from processing CoinJoin transactions. In a newer email, the Binance representative further stated: “However, at this juncture, Binance Singapore does not tolerate any transactions directly and indirectly associated with gambling, P2P, and especially darknet/mixer sites.”
By applying the CoinJoin tool, the investor managed to group a number of Bitcoin transactions and mix their unspent transaction outputs, known as UTXOs. Therefore, the transactions successfully hid the recipient of the transactions which increased the investor’s privacy. When attempting to withdraw his Bitcoin assets without using the tool, the investor received his assets. In an update, Catxolotl stated: “Update: I got my sats back, but not without promising Big Brother I wouldn’t mix those utxos. Hope everyone got something out of this.”
The event spurred quite the controversy on Crypto Twitter, given the fact that the exchange is far from decentralized and still has to follow local and regional laws that prevent some of these tools. However, Changpeng Zhao commented that while the tools do in fact provide users with an additional layer of anonymity, there are still various risks associated with the tool.