IRS-CI Cyber Crimes Unit request for information about privacy-centric cryptocurrencies
It’s no surprise that the Criminal Investigation Division (CI), the top federal law enforcement agency under the U.S Department of Treasury, is keen to keep track of cryptocurrencies to guard against illegal activities. Although tracing public blockchains like Bitcoin and Ethereum is easy, that success has not yet been replicated on privacy coins, coin mixers, and sometimes layer-2 solutions.
The United States tax agency request for information about privacy-centric cryptocurrencies
A recently published IRS-CI Cyber Crimes Unit request that’s available for public viewing is requesting information from “industry partners” in regards to crypto assets that leverage privacy techniques and other types of protocols that hide transaction data. The Request for Information (RFI) was published on June 30, 2020, and the RFI is dubbed “Pilot IRS Cryptocurrency Tracing.”
The IRS-CI request states:
“This RFI is associated with a pilot IRS Criminal Investigation Division (CI) program. CI Cyber Crimes is requesting information about systems that will allow developers and testers to conduct investigative research of distributed ledger transactions involving privacy cryptocurrency coins.”
According to the statement, the information collected “will allow developers and testers to conduct investigative research” on privacy-enabled digital assets such as Monero (XMR), Zcash (ZEC), Dash (DASH), Grin (GRIN), Komodo (KMD) ), Verge (XVG), and Horizon (ZEN); layer-2 solutions on public blockchains such as the Lightning Network (LN) and side chains such as Plasma and OmiseGo.
The statement stated:
“Acquiring applications to allow an investigation to trace privacy coins more easily and other protocols that provide anonymity to illicit actors would allow investigations to be more effective, as well as functioning a higher level of deterrence by making it harder to conceal criminal activity.”
The demand for the privacy coin is increasing
As the blockchain industry focuses on more secure solutions for users’ security purposes, there is a risk of hiding illegal activities, the statement said. Monero (XMR) received reception in the overall application with the BEG report in April that North Korea is currently exploiting XMR.
Bitcoin developers are now focusing on the integration of Schnorr Signatures, to enhance user’s privacy following a successful initial stage integration on its fork, Bitcoin Cash. On Layer 2 solutions, LN and Raiden Network mentioned explicitly; the IRS investigative program will focus on the previously neglected market. Lightning Labs recently launched an L2 monitoring app, the “Eye of Satoshi.”
Blockchain chain analysis is heating up with existing companies in the field such as CextTrace, Chainalysis, and Elliptic recently added Stellar transactions on their radar, all of which provide competitive features for supervised blockchains.
Although the IRS believes that the current sector has limited resources to track private currencies fully, Chainalysis recently announced the addition of the cryptocurrencies such as Dash (DASH) and Zcash (ZEC) to its blockchain supervisor.
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