Cryptocurrencies brought a level of freedom to those who use them. On the other hand, it brought a complicated equation to governments across the globe. As cryptocurrency users went about their business seemingly worry-free, governments were left to solve the equation of money-laundering, tax evasion, terrorist financing among other ills easily propagated using virtual currencies.
For governments, this equation can only be solved by following the money trail. Whether fiat or virtual. Along the path, United States government agencies spent millions stalking cryptocurrency traders on the blockchain. Although more agencies are involved, the Internal Revenue Service (IRS), the Federal Bureau of Investigation (FBI), and the U.S Immigration and Customs Enforcement (ICE) are the top spenders with each signing blockchain analyzing contracts worth more than 1 million U.S dollars.
According to Diar, a research firm, the IRS has awarded 9 blockchain analysis contracts worth $2,191,835. The ICE and the FBI have awarded 9 and 12 contracts worth $1,537,945 and $1,142,671 respectively.
Other agencies that spent a considerable amount of dollars to track crypto users on the blockchain are the CFTC, SEC, DEA, and Fiscal Service. These agencies have issued a total of 24 contracts worth 847,737 U.S dollars.
A major portion of the government contracts has been awarded to Chainalysis which is a New York-based blockchain analysis firm. Other firms like Elliptic and CipherTrace have also handled a major portion of these contracts.
“The pseudo-anonymity of cryptocurrencies provides intelligence agencies with a paper trail which can very often be decrypted by blockchain analysis companies,” noted Dair, adding that the “information can be used as actionable intelligence with the possibility of leading to criminal prosecution.”
With such high spending especially by the Internal Revenue Service which accounted for 38 percent of the total amount spent, government agencies in the United States and the world at large “are paying very close attention” to ways that virtual currencies may encourage criminal activities.
Even as the agencies spend millions stalking cryptocurrency traders, do you think the agencies will continue spending more due to the emergence of privacy-focused blockchain projects?
Let us know your thoughts in the comments section below.