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The US government is trying to develop methods to monitor forensic privacy-focused cryptos like Monero and Zcash.
One of the main features of cryptocurrency is its alleged anonymity. However, Bitcoin and other major virtual currencies can easily be traced, which has led to the creation of privacy-focused currencies such as Zcash (ZEC) and Monero (XMR). Such privacy is something that governments and forces of order are not big fans, and that's why the Department of Homeland Security's Small Business Innovation Research (SBIR) has launched an appeal to companies to create ways to 39. Application of the law to create forensic analysis techniques to track transactions using such cryptocurrencies focused on privacy.
Monero and Zcash in the viewfinder
The SBIR issued a pre-solicitation document detailing this request. The objective of this program is "to design a product to support the implementation of block-based forensic analysis, data analysis and information sharing".
The document specifically points out Monero and Zcash as the type of cryptocurrency the United States government wants to be able to trace. The government agency finds the privacy factor associated with this type of cryptocurrency, stating:
A key feature behind these new blockchain platforms that is often emphasized is the ability to maintain anonymity and privacy protection. Although these characteristics are desirable, there is equally an interesting interest in tracing and understanding illegal blockchain transactions and actions. To this end, this proposal requires solutions that allow law enforcement investigations to perform forensic analyzes on blockchain transactions.
Three phases of development
The program has three distinct phases for development. Phase I consists of designing a blockchain system or modifying an existing one to allow forensic analysis by the forces of the order. Architecture should be produced to show how system components can be upgraded or exchanged for use in new blockchains that come into use.
Phase II presents a working prototype that will demonstrate the blockchain forensic techniques on three use cases determined by the Department of Homeland Security. These use cases will analyze suspicious transactions without external data, with external data and on another blockchain platform.
Phase III will see the implementation of this forensic analysis system and its diffusion in many local and federal government agencies, as well as in commercial companies. As the document notes:
These technologies are about to radically transform operations in the government and the private sector. Because of the significant impact in areas such as governance, application of data sharing agreements and exchanges of encrypted analytics, there is a wide variety of applications in the public and commercial market that can benefit from the development of a successful product. Blockchain's forensic analysis for the national security firm can help the law enforcement and DHS security operations between the components and the state and local police operations. Likewise, private financial institutions can take advantage of these capabilities in applying "customer knowledge" and anti-money laundering compliance.
It seems that the US government is quite serious about being able to monitor cryptocurrencies that focus on privacy. Those who like to use Zcash and Monero may eventually want to look for other coins to use if they wish to keep control of the government's eyes on their transactions. One thing is certain: new blockchains will be developed to maintain privacy, which means that the ongoing conflicts between governments and privacy advocates will continue.
What do you think of this new DHS program? Let us know in the comments below.
Images courtesy of Shutterstock.
