A U.S. Department of Homeland Security (DoHS) division is now considering the possibility of integrating Blockchain technology to forensic analysis tools to be able to improve the tracking of privacy coin transactions.
One of the most serious issues about digital currencies like Bitcoin is worries that the burgeoning innovation can be exploited in money laundering activities by rogue nations, terrorist organizations, and cybercriminals.
Because of this, the U.S. government has intensified its efforts in tracing Blockchain transactions. It has already learned to track Bitcoin transactions from its source as well as identify the wallet holder. Such is the case of two men from Iran, who were sanctioned by the U.S. Treasury, due to their connection to ransomware attacks.
The government has now set its eyes on privacy-focused digital currencies like Dash, Monero, and others.
According to a report by The Block, a pre-solicitation document released by the DoHS’s Small Business Innovation Research Program indicates that the U.S. government is reportedly investigating methods wherein it can better trace transactions of the said privacy coins on the Blockchains.
Although the report talks about certain positive attributes of privacy coins, it also puts the spotlight on transactions of ‘illegal nature” taking place through this type of digital currencies. The government’s ultimate objective, of course, is to develop a platform that law enforcement agencies, government branches, and even private financial institutions can utilize in analyzing and enforcing crucial anti-money laundering (AML) laws.
However, because the document is only a pre-solicitation, it is “merely an opportunity for interested parties to comment on or request information about the attached topic areas.” This does not also signify that the government already possesses the said tools. Still, this only demonstrates that the DoHS indeed has its sights set on privacy coins and their potentially illicit usage.
Privacy-centered digital currencies such as Zcash, Dash, and Monero enable users to conceal transactions and address data from anyone other than the sender and receiver.
Cybercriminals are particularly leaning towards Monero because they can easily cover their tracks with the cryptocurrency. Monero has also overtaken Bitcoin as the most-used digital currency on the dark web. These reasons have compelled the U.S. (just like Japan) to address concerns regarding privacy coins.
In June, the Japanese Financial Services Agency (FSA) has banned the country’s crypto exchanges from offering privacy coins. Japan has suffered a string of crypto-related heists which resulted in millions of dollars in losses.
Early in 2018, Coincheck suffered the largest crypto exchange hack in history. It was among the exchanges that were mandated to adhere to the FSA ban, removing Monero, Dash, Zcash, and Augur’s Reputation coin.