Mixing (Tumbling)

Mixing, also called tumbling, is the process of obscuring the origin and ownership trail of cryptocurrency by pooling funds from multiple users and redistributing them to destination addresses, breaking the direct link between sender and recipient visible on public blockchains.

Centralized mixers operate as services accepting deposits, combining them with other users' funds, and sending equivalent amounts minus fees to designated withdrawal addresses after time delays. Decentralized mixing protocols like Tornado Cash use smart contracts and zero-knowledge proofs enabling users to deposit cryptocurrency, receive cryptographic proof of deposit, and later withdraw to unlinked addresses without the protocol knowing which deposit corresponds to which withdrawal.

Mixing presents severe regulatory and compliance concerns because it frustrates blockchain analytics, enables sanctions evasion, and facilitates money laundering by severing the traceable connection between illicit proceeds and criminal activity. OFAC sanctioned Tornado Cash in August 2022 for processing over $7 billion including $455 million stolen by North Korean hackers. Most regulated exchanges implement policies blocking deposits from known mixing services and flagging customers who use mixers for enhanced scrutiny or account closure. FATF identifies mixing as a key money laundering red flag. Criminal prosecutions have targeted mixer operators for operating unlicensed money transmission businesses and conspiracy to launder money. While privacy advocates argue mixing serves legitimate purposes including protecting financial privacy and commercial confidentiality, regulatory enforcement has effectively restricted mixing to illicit or high-risk use cases in jurisdictions with AML enforcement.