Binance Returns Frozen BTC After User ‘Promises’ Not To Use Coinjoin

The Bitcoin users who use the privacy tool Coinjoin to add anonymity to their transactions are now facing a major wake-up call. In the latest cryptocurrency news, we can see that Binance returns the funds that it froze in the withdrawal.

An ongoing Twitter debate which started on December 19 showed that a user by the name of Catxoloti uploaded a correspondence from Binance Singapore staff stating that they had launched an “investigation” into a withdrawal of an unknown amount of BTC.

The reason, according to them, was Catxoloti using Coinjoin via the wallet provider Wasabi. A Binance representative then confirmed the problem in private comments and explained:

“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.”

As Binance returns the frozen funds, Coinjoin refers to a method of grouping together Bitcoin transactions and “mixing” unspent transaction outputs as well as hiding who sent what to which address in order to increase the users’ privacy.

The other Binance news show that the CEO Changpeng Zhao known as “CZ” also said that for him, Singapore regulations meant that Coinjoin transactions were no longer desirable. He explained:

“However, at this juncture, Binance Singapore does not tolerate any transactions directly and indirectly associated with gambling, P2P, and especially darknet/mixer sites.”

Meanwhile, as Binance returns the frozen BTC, Catxoloti confirmed that he had received possession of the funds following this debacle and said:

“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.”

Neither Binance nor CZ prepared to apologize for the scandal and what they saw as abiding by local laws. This is how a fierce debate erupted on social media with well-known Bitcoin figures clashing over the decision to root out transactions with enhanced privacy.

“Some advocate using CoinJoin as a ‘best practice’ but they do not necessarily inform you on the risks,” the Bitcoin Twitter handle wrote, tagging self-confessed “Bitcoin maximalist” Giacomo Zucco.

The account also said:

“FYI, a risk of using CoinJoin is @chainalysis or others will increase your ‘risk score’. @binance & others use these vendors & share data.”