decrypt.co
Cryptocurrency intelligence firm CipherTrace announced today that it has developed a toolset for tracing Monero (XMR) transactions—and that it has done so at the behest of the United States Department of Homeland Security (DHS).
Monero has gained popularity for its privacy-centric design, making it the second most popular coin for dark web transactions after Bitcoin. However, CipherTrace claims that its tools will allow investigators to search, explore, and visualize Monero transactions.
CipherTrace Announces World’s First Monero Tracing Capabilities for Law Enforcement, Government, and Virtual Asset Service Providers https://t.co/jcP1tfaKzK #monero #privacycoins #blockchainanalytics
— CipherTrace (@ciphertrace) August 31, 2020
According to CipherTrace, the firm spent a year working on the toolset, which was performed via a contract with the DHS Science & Technology Directorate. According to GovTribe, some $2.4 million was paid out to CipherTrace over the course of the contract, which was inked in 2018 and had a maximum potential value of $3.6 million.
While the tools were developed for the use of the DHS to track stolen or illegally used funds, CipherTrace suggests that crypto exchanges, trading desks, and investment funds will also benefit from knowing that they aren’t accepting tainted funds—and that they remain in compliance with regulations.
Furthermore, CipherTrace plans on adding further functionality to the current version of the toolset, with features such as “entity transactions clustering, wallet identification, [and] exchange attribution” planned for the future.
And although today’s announcement would seem to be a blow against Monero and the promise of privacy coins, CipherTrace paints it as a positive for the future of XMR—particularly given that it has been delisted from some exchanges.
"Analytics is crucial to the survival of privacy coins because, if they cannot evaluate risks, some governments could make transacting with privacy coins extremely difficult or ban them outright, like Japan,” said CipherTrace CEO Dave Jevans, in a statement provided by the company.
“Several Korean Exchanges delisted privacy coins and, just last week, several Australian exchanges banned Monero and Zcash. As privacy advocates ourselves, our hope is that by developing capabilities for tracing Monero, we can help to ensure Monero's viability."
CipherTrace Chief Financial Analyst John Jeffries told CoinTelegraph that its XMR tracing tools could be used in ransomware cases, for example, although they’re not yet robust enough to be used for anti-money laundering purposes.
The firm’s tools track transaction flows but do not reveal the identities of users; law enforcement must use other tools and obtain court orders to complete that part of the puzzle.