CipherTrace: US Department of Homeland Security Can Now Track Monero Transactions

Cryptocurrency intelligence firm CipherTrace announced today that it has developed a toolset for tracking Monero (XMR) transactions at the request of the U.S. Department of Homeland Security (DHS).

Monero is widely popular for its anonymous design, and its acceptance on darknet markets is second only to Bitcoin, the largest cryptocurrency. CipherTrace claims that its new toolset will allow investigators to search and visualize Monero transactions.

According to CipherTrace, the company spent a year working on the toolset, which was done through a contract with the Department of Homeland Security’s Science and Technology Directorate. GovTribe reported that the DHS paid CipherTrace approximately $2.4 million over the duration of the contract.

Is it a blow or a benefit?

While the tools were developed for the Department of Homeland Security (DHS) to track stolen or illegally used funds, CipherTrace said cryptocurrency exchanges, trading desks and investment funds would also benefit by allowing them to identify problematic transactions and comply with regulatory requirements.

Furthermore, CipherTrace plans to add more features to the current version of the toolset, with plans to offer capabilities such as “entity transaction clustering, wallet identification, and exchange attribution” in the future.

While today’s announcement may seem like a blow to Monero and the promise of privacy coins, CipherTrace believes it is positive for the future of Monero, especially considering that some exchanges have already delisted the coin.

CipherTrace CEO Dave Jevans said in a statement provided by the company:

“Analysis is critical to the survival of privacy coins because if they fail to assess the risks, some governments may make it extremely difficult to trade privacy coins, such as Japan, which has completely banned privacy coins, several South Korean exchanges have dropped all privacy coins, and last week, several Australian exchanges also banned Monero and Zcash.”

Tracking results are not 100% accurate

According to Jevans, the Monero tracking tool takes a different approach than the Bitcoin tracking tool, and the results are not entirely clear. Still, the tool could provide something for law enforcement, who can cross-reference it with other data and resources to aid in investigations.

He said:

“You can’t have the same certainty that you have with Bitcoin, and in tracing Monero, it’s really more of a probability game where you can say, okay, I have a 98% chance that this is going from this address to that address, or a 78% chance that it’s some other type of thing. It requires a different approach than (saying): I’m going to make sure everything is perfect…”

"We're not saying this is personally identifiable, we never do that at CipherTrace, we don't identify individuals, names, addresses, anything like that, but it's a law enforcement tool that can help law enforcement investigate when it's determined there's been a crime, and then they'll identify the individual."

This article was translated with permission from Decrypt.com