How the U.S. Government Studies Blockchain
Hello everyone! This is Pavluu. Not long ago, we wrote about some very important topics related to darknet users and Bitcoin users. These included the following translated articles:
- 47% of all Bitcoin transactions take place within the darknet
- The use of Bitcoin transaction analysis to deanonymize users of hidden Tor services
Today, continuing the topic of the questionable anonymity of Bitcoin, I present another translated article about how U.S. government agencies commission blockchain transaction analysis for various purposes—from collecting taxes on cryptocurrency income to tracking down darknet drug dealers.
Government Surveillance of Blockchain Transactions
As of now, it is known that the U.S. federal government has paid approximately $700,000 to a private corporation to enable various agencies to monitor the Bitcoin blockchain.
Which Private Corporation Is Involved?
The corporation helping the U.S. government conduct large-scale surveillance of Bitcoin transactions is called Chainalysis. Here is their website.
What Do We Know About Chainalysis?
- Chainalysis has contracts with at least six U.S. federal agencies.
- The company has offices in New York, USA, and Copenhagen, Denmark.
- Chainalysis is a blockchain surveillance company that various U.S. federal agencies contract with. It was founded in 2014.
Chainalysis is not the only corporation helping law enforcement monitor Bitcoin transactions. DeepDotWeb previously reported on a private company called Verint, which offers services to local and state police departments. For example, they offered virtual currency (BTC) monitoring services to the Boston Police Department early last year.
Which U.S. Agencies Use Chainalysis?
- Internal Revenue Service (IRS)
- Drug Enforcement Administration (DEA)
- Federal Bureau of Investigation (FBI)
- U.S. Immigration and Customs Enforcement (ICE)
- Department of the Treasury
- Securities and Exchange Commission (SEC)
How Much Did They Pay for These Services?
It is estimated that the U.S. government has paid around $700,000 for these blockchain analysis services.
Other Companies Involved
It’s also worth noting that ICE and the IRS have a separate contract with a company called Flashpoint, which helps them analyze blockchain transactions and identify darknet users. The IRS has participated in several darknet-related investigations and paid Flashpoint for access to their API.
Of course, many cases involving Chainalysis and Flashpoint remain undisclosed. However, there is a particularly interesting fact: these companies were involved in the closure of the “Silk Road” marketplace. Specifically, Chainalysis helped uncover the actions of a former DEA agent, Carl, who stole bitcoins during the Silk Road investigation (read more in the book “American Kingpin”).
Chainalysis and International Cooperation
It’s important to note that Chainalysis works not only with U.S. law enforcement but also operates worldwide. In February 2017, Chainalysis signed a “Memorandum of Understanding on Information Sharing” with Europol, the European Union’s law enforcement agency.
Comments from Chainalysis Leadership
Michael Gronager, CEO and co-founder of Chainalysis, told Danish television:
“Criminals who use Bitcoin are not much different from ordinary criminals. It’s just money that moves faster. Of course, it’s a more advanced way of doing business, and many are keeping up with the times by using modern technology.”
Michael believes that Bitcoin provides financial transparency in response to the financial crisis. Other companies, such as Elliptic, also aim to provide blockchain monitoring software and services to law enforcement.
About Elliptic
Elliptic is a U.S.-British company founded in 2013. It has received millions of dollars in funding from Octopus Investments, Santander InnoVentures, KRW Schindler, Digital Currency Group, and Paladin Capital Group. Paladin Capital Group is led by a former NSA director. At the end of 2016, Elliptic partnered with LexisNexis Risk Solutions to combat money laundering.
For those who want to avoid financial surveillance, it may be worth considering privacy-focused cryptocurrencies with opaque blockchains, such as Monero.