Chainalysis Wins $625,000 IRS Contract to Track Monero

Is the era of the transparent Monero approaching? The United States government hopes so. After several days of waiting, the IRS finally granted a contract to Chainalysis to develop a tool that will allow authorities to track privacy coins like Monero and second-layer solutions like Lightning Network.

Cracking Monero is an Expensive Task

According to an official post, Chainalysis won the contract along with Integra FEC LLC, a Texas-based forensic data analysis company, founded in 2012 and focused primarily on the field of traditional finance.

As CryptoPotato previously reported, the $625,000 contract seeks, in general terms, to deanonymize the crypto anonymization initiatives such as privacy coins, second layer solutions, mixers, tumblers, etc.

Provide information and technical capabilities for CI Special Agents to trace transaction inputs and outputs to a specific user and differentiate them from mixins/multisig actors for Monero and/or Lightning Layer 2 cryptocurrency transactions with minimal involvement of external vendors

Neither Chainalysis, the IRS or Integra FEC have provided any comment on the contract. Ricardo Spagni, a former Monero lead developer and privace advocate is also silent about this issue.

U.S vs Privacy

The U.S. government does not want to let any bird slip through its fingers. For several years, different agencies have been trying autonomously to find solutions that would allow them to use technology to “beat” cryptocurrencies at their own game. The main argument is that these tokens are used for illicit activities, even with reports showing that criminals prefer traditional banks over cryptocurrencies.

Donald Trump had previously commanded the Secret Service to protect the United States’ financial interests by monitoring cryptocurrencies transactions. Likewise, the IRS has taken additional steps to tax the ecosystem.

Libertarians DESTROYED by the IRS!https://t.co/QXZHO0Ou4W

— Prince Kropotkin (@Prince_Kropotkn) September 29, 2020

Other agencies have taken a more drastic approach. The Pentagon recently started hiring a crypto analytics service to “quickly detect criminal and suspicious cryptocurrency transactions” and had previously developed a war game in which Generation Z used cryptocurrency to rebel against the system.

Even Ciphertrace, a blockchain forensics company claimed to have developed a tool capable of tracing Monero, and the Department of Homeland Security is behind the initiative.

The FBI is also interested in tracking crypto-related activities. A recent report shows that the FBI’s workforce tracked down the blockchain to end a criminal network that used Monero and other cryptocurrencies to finance itself.

Perhaps considering the above, criminals may want to move out of the crypto-verse and return to traditional banks… It seems that those tend to be soft with criminals when they have deep pockets.