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Chainalysis has won a contract to create a tool that will allow the IRS to track privacy coins like Monero and BTC lightning Networks. The United States Government believes that transparency is extremely important and after several days of wait, the contract has been awarded to Chainalysis. The organization will be developing a tool that will track privacy coins and second-layer solutions.
Chainalysis won the contract along with Integra FEC LLC, which is a forensic data analysis company based in Texas. The organization was founded in 2012 and is focused mainly on conventional realms of finance. The contract value is $625,000 and as per its discussions, the contract seeks to remove the facelessness of certain crypto initiatives like second-layer solutions, privacy coins, and tumblers.
This will provide additional information and enhance technical capabilities for CI special agents to track transaction inputs and outputs to a particular user and differentiate them from mixins/multisig actors for Monero and/or Lightning Layer 2 cryptocurrency transactions with minimal involvement of external vendors. No official comment or statement from Chainalysis, the IRS, and Integra FEC has been forthcoming. Even Monero’s lead developer Ricardo Spagni has decided to keep mum about the issue and what this could mean for Monero.
The Federal government is becoming watchful of any situation that can prove to be fatal for the future of the financial world. It wants everything to be transparent. For many years now, there have been many entities that have been working towards creating solutions letting them use technology to get one step ahead of cryptocurrencies. Such coins and tokens in all likelihood could be used to undertake illicit activities. There are also talks of reports which show that traditional banks are preferred by criminals vis-a-vis cryptocurrencies.
The agency had accepted applications until September 16th. The amount of the contract will be dished out in two phases to fund the development of the selected application. In the first phase as planned earlier, the IRS will pay $500,000, and the development team will have to deliver the ‘privacy cracking product prototype’ within 8 months. The remaining payout amounting to $125,000 will happen if the pilot run is successful and the prototype receives the word go from the government.
The IRS cites the use of Monero and other privacy coins in unlawful activities to justify its bounty move. IRS also believes that Bitcoin’s much-famed Layer 2 network has grown significantly ever since its inception in March 2018. The rising number of nodes in the network is still a matter of concern as they are close to 10,000.
Different agencies have a different approach, some even drastic. The Pentagon guards a crypto analytics service to detect criminal and suspicious cryptocurrency transactions. Ciphertrace, a blockchain forensic company has also claimed to develop a tool to trace the Monero, and assumedly the Department of Homeland Security is the brain behind it.
With this, it is high time that such organizations which intend to indulge in fraudulent practice should get their act together and stick to traditional finance.