The U.S. Dept. of Homeland Security Wants Blockchain Surveillance Tools For Privacy Coins

Bhushan Akolkar
By Bhushan Akolkar
Posted on Dec. 4, 2018
The U.S. Dept. of Homeland Security Wants Blockchain Surveillance Tools For Privacy Coins

As the issues relating to money laundering in the crypto market are on the rise, the U.S. law enforcement agencies are gearing up to have further analysis and investigation of the blockchain networks. Last Friday, November 30, the U.S. Department of Homeland Security (DHS) published a pre-solicitation document for the fiscal year 2019. 

Besides blockchain technology, the document covers a range of subjects like the Internet of Things (IoT), communications, sensors, cybersecurity. In the document, DHS explains that it wants dedicated surveillance tools to analyze privacy coins like the Monero and Zcash, that operate on the private blockchain networks.

The document notes that even though the blockchain technology has a huge future potential in the government and commercial space, some networks provide an unreasonable level of transaction anonymity. The DHS says that the agency has conducted previous analysis on Bitcoin (BTC), however, that covers only a “limited scope in the realm of cryptocurrencies”. 

The agency notes that the forensic analysis of blockchain transactions can be approached through different use cases. However, the ultimate outcome should “provide working approaches to treating newer blockchain implementations.” The agency notes how the blockchain transactions can be used for administrative purposes. 

“Because of the significant impact in areas such as governance, data sharing agreement enforcement, and encrypted analytics interchanges, there are a wide variety of applications in government and the commercial marketplace that can benefit from successful product development.”

DHS Says Privacy Coins Suitable for Illicit Activities

The DHS also notes that while the features of “privacy protection” are desirable, there is “a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature.”

The DHS outline three different way to alleviate the issue of using privacy coins for suspicious activities. 

  1. The first phase involves the role of programmers and researchers. The DHS asks to modify the existing analysis tools or modify the blockchain analysis ecosystem for law enforcement agencies. These tools should have a built-in surveillance architecture for monitoring privacy currencies. 
  2. The second is developing a blockchain monitoring prototype capable of demonstration and also involves the analysis of “suspicious transactions without external data, with external data, and on another blockchain platform.” 
  3. The this involves a complete roll-out of government-grade and commercial blockchain surveillance applications.

The DHS solicitation letter also notes: “Blockchain forensic analytics for the homeland security enterprise can help the DHS law enforcement and security operations across components as well as state and local law enforcement operations. Private financial institutions can likewise benefit from such capabilities in enforcing “know your customer” and anti-money laundering compliance.”

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