According to the Diar research firm, government agencies (namely the IRS) have collectively spent USD 5.7 Million on blockchain tracking analysis. The money was spent on blockchain analysis tools to understand how people are using cryptocurrency and to see if they have been avoiding taxes.
Blockchain tracking analysis spending by various government agencies
The Internal Revenue Service is the biggest spender of all government departments, accounting for 38% of total blockchain tracking analysis spending. The IRS has spent a total of USD 2.2 Million and has multiple contracts with digital forensic companies. They went as far as to take Coinbase to court, compelling them to hand over customer data.
The second biggest spender on the list might come as something of a surprise. Immigration and Customs Enforcement (ICE). ICE has taken out over nine contracts that collectively amount to USD 1.5 Million. The FBI comes in third on governmental cryptocurrency tracking with 12 contracts worth over USD 1.1 Million.
This ICE interest in blockchain tracking and digital currency is quite ominous for many frequent travelers who use BTC and other cryptocurrencies as a means of exchange. There is currently a proposed bill (S.1241) put forward by Senator Chuck Grassley which is aiming to catch cryptocurrency holders at entry points into the USA. Travelers who fail to declare could have laptops seized and searched if the bill gets approved. The bill proposes a –
“border protection strategy to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States.”
The ease of tracking bitcoin and performing blockchain tracking analysis
It is a mistake to believe that bitcoin transactions are private, though it is a mistake that is quite frequently made. Bitcoin transactions are quite easy to track with the right tools, involving a combination of IP address and the public transaction record. A study conducted in April 2018 by Qatar university demonstrated how easy it is to track bitcoin transactions without using anything resembling sophisticated tools.
Bitcoin is anonymous, but not private, an important distinction. Privacy-based coins such as DASH and XMR are those that are truly private and very difficult to track. It is to be expected that bitcoin transaction monitoring is going to increase in the future as the technology become more ubiquitous and government agencies become more efficient at tracking civilians. The FBI has also been very active in sting operations on platforms such as Local Bitcoins to lure and catch those who are using the alternative form of finance.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.