EU Says Bitcoin Lightning Network and Other L2 Solutions Are “Data Obfuscation” Technologies That Could Be Abused by Criminals

The European Union's Internal Security Innovation Center (a "collaborative network of innovation laboratories" from EU member states) has released a report stating that in addition to technologies such as Mimblewimble, zero-knowledge (zk) proofs, token mixers, and privacy coins such as Monero and Zcash, "Layer 2 solutions such as the Lightning Network may also be abused by criminals." The report states that the Lightning Network's "two-party multi-signature payment channel does not broadcast all transactions to the blockchain, but only broadcasts the opening and closing of the channel," and adds that it and other Layer 2 solutions may pose "problems for law enforcement investigations."