US Govt Spent Over $5 Million to Keep an Eye on Crypto Transactions

 In Altcoins, Exchanges, Governments and Regulations

American government agencies have significantly increased the number of contracts they’ve entered into with blockchain analysis companies that conduct blockchain surveillance, with the IRS leading the pack.

With the steady rise in the popularity of cryptocurrencies, United States government agencies have concurrently upped their expenditure on blockchain analytics firms to keep a close eye on cryptocurrency transactions for signs of potentially illicit activity.

According to research conducted and published by Diar, the US government’s combined total spending on blockchain analysis companies has more than tripled since the beginning of 2018, and so far adds up to $5.7 million.

Owing to the anonymity they claim to offer and the lack of regulation in the space, cryptocurrencies have been viewed as problematic and potentially dangerous by financial institutions, regulators, and governments worldwide. The increasing number of crypto transactions has led to rising demand for blockchain analysis – a form of surveillance carried out with the aid of advanced software, which can enable companies to trace and link identities to cryptocurrency addresses and transactions.

While blockchain analysis is typically used by banks and other financial institutions to ensure compliance with know-your-customer (KYC) and anti-money laundering (AML) regulations, it has also become a sought-after tool for law enforcement and intelligence agencies, to aid them in targeting any potentially criminal activities being carried out via cryptocurrencies, such as money laundering, tax evasion, and terrorism financing.

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The research by Diar revealed that as per public records, the US government’s purchase orders and contracts with blockchain analysis firms have grown exponentially since the start of the year, with the greater portion of the deals having been contracted to Chainalysis, while Elliptic and CipherTrace come in second and third respectively.

Out of all government agencies, the majority of the spending (38%) can be attributed to the Internal Revenue Service (IRS), which deals with taxes in the United States (although it has yet to outline a clear policy and guidelines for crypto taxes). The second-highest spender is (somewhat surprisingly, according to Dair) the U.S. Immigration and Customs Enforcement (ICE), while the Federal Bureau of Investigation (FBI) is the third-highest spender. The IRS, ICE and FBI combined amount for 85% of the total spending.

Other agencies spending on blockchain analysis include the Fiscal Service, Drug Enforcement Administration (DEA), Securities and Exchange Commission (SEC), and the US Commodity Futures Trading Commission (CFTC).

The report also noted that the demand for blockchain analysis has not gone unnoticed by investors – to date, blockchain analytic firms have collectively raised more than $28 million.

As Dair’s report reveals, the “pseudo-anonymity” provided by cryptocurrencies can, in most cases, be decrypted by blockchain analytic companies, and this information can then be used as evidence for criminal prosecution. As the US agencies’ rise in spending would suggest, cryptocurrencies may not (as many would like to believe) be entirely beyond Big Brother’s purview.

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