As regulators attempt to counter the rise in darknet marketplaces for illegal substances, a report funded by the European Commission has recommended that crypto exchange users be subject to more stringent identity checks.

The report was commissioned by the European Monitoring Centre for Drugs and Drug Addiction (an agency of the European Union). It comes as legislators push for stricter anti-money laundering checks for transactions made with cryptocurrency. However, it warns that better police training may prove to be more effective than bans.

It stated that “It is crucial that countries around the globe implement the recommendations of the Financial Action Task Force” to ensure that illicit cash-outs can be traced back to the users of ATMs, brokers, and exchanges.

Eric Jardine and Kim Grauer of Chainalysis authored the report. They cite darknet marketplaces’ use as persistent and increasing despite enforcement efforts. Chainalysis, a blockchain research platform, provides blockchain analytics solutions for regulators and has millions in contracts with U.S government agencies.

The report stated that banning cryptocurrency use does not stop darknet activity. However, police-led closures like the one of Hydra 2022 have a limited impact on the future. But investigators can improve their ability to respond.

The report stated that law enforcement requires training in the use of technology and new investigative techniques to conduct these types of investigations. Skills such as how to trace and seize encrypted crypto and how to track it are examples.

Next week , EU legislators will vote on landmark new licensing regulations for the crypto sector. These rules would include identity checks for users who transfer funds. As part of a larger money-laundering overhaul, the European Parliament also wants to set higher limits for anonymous cryptocurrency transactions.

Continue reading: EU Money Laundering Law Will Not Prevent Crypto Payments

Edited and written by Sandali Handagama.