U.S. Law Enforcement Plans to Develop Sophisticated Surveillance Tools To Analyze Privacy Coins

04. Dec 2018 Posted by Akolkar B on News

Last week, the U.S. Department of Homeland Security (DHS) released a pre-solicitation notice saying that it will dedicate resource to develop forensic blockchain applications which can help them to analyze and investigate the privacy coin blockchain networks.

Furthermore, DHS is seeking the development of sophisticated surveillance tools which can help the agency to look into the blockchain networks of privacy coins like ZCash and Monero. The DHS acknowledges that the Distributed Ledger Technology (DLT) can play a crucial role in developing government and commercial applications of the future.

It notes: “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.”

However, there are some blockchain networks which offer unreasonable level of anonymity. The solicitation letter reads: “This proposal seeks applications of blockchain forensic analytics for newer cryptocurrencies, such as Zcash and Monero”.

Furthermore, DHS says that while the features of privacy coin networks are desirable, “there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature”.

It further adds: “This proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions. This analysis can be approached in any number of ways and may consider different data situation use cases depending on whether additional data from off-chain sources are available.”

To reduce the anonymity feature, DHS proposes three steps:

  • The first is that researchers should develop a blockchain analysis ecosystem dedicated for law enforcement agencies or else they should modify the existing tools to suite the agency’s needs. Of course, the new tool should host the surveillance architecture for privacy coins.
  • The second is developing a blockchain monitoring prototype providing an analysis of “suspicious transactions without external data, with external data, and on another blockchain platform.”
  • The third and last is the complete roll-out of the blockchain surveillance applications.

“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,” states the DHS solicitation letter. “Private financial institutions can likewise benefit from such capabilities in enforcing “know your customer” and anti-money laundering compliance.”