US spends millions of dollars linking individuals to crypto funds

The IRS, FBI and ICE are the top three US enforcement agencies splashing out on outsourcing blockchain analysis to track down the cryptocurrency funds of people under investigation

The US government has so far spent about $5.7 million on blockchain analysis specialists as it seeks help in tracking the cryptocurrency funds of individuals under investigation.

The Internal Revenue Service (IRS) is the US enforcement agency that has spent most in blockchain analysis with nine contracts worth about $2.2 million, according to a report by Diar.

US Immigration and Customs Enforcement (ICE) is second on the list with nine contracts worth over $1.5 million. The Federal Bureau of Investigation (FBI) is the third largest spender with 12 contracts totalling just over $1.2 million. Another $330,000 was spent by the Bureau of the Fiscal Service (FS), Drug Enforcement Administration (DEA), Securities and Exchange Commission (SEC) as well as the Commodity Futures Trading Commission (CFTC).

Increased demand for expertise

“US government agencies have upped the need for expertise from blockchain analytic firms to assist them in honing down on potential tax evasion, money laundering, terrorist financing, drug dark markets, among the other illicit activities,” Diar says in its report.

“As Bitcoin’s popularity continued to grow last year and the daily number of confirmed transactions reached nearly 500,000 in December, the demand by government agencies for blockchain analysis consequently increased as well,” it adds. “And investors have taken note as companies that are focused exclusively on blockchain analysis have collectively raised $28.8 million to date.”

The report highlights the fact that “since the beginning of the year, the amount that the government agencies paid to blockchain analysis companies more than tripled”.

Top of the pops: Chainalysis

Chainalysis is the subcontractor that US agencies prefer as $5.3 million have been signed over to the company for investigations aimed at linking individuals to crypto funds. Elliptic and CipherTrace are the two other firms sought out by the US government.

Despite the concept of anonymity behind cryptocurrency, users of virtual currencies apparently leave enough of a trace that investigators can figure out who owns any given wallet.

“The pseudo-anonymity of cryptocurrencies provides intelligence agencies with a paper trail, which can very often be decrypted by blockchain analysis companies,” Diar explains. “That information can be used as actionable intelligence with the possibility of leading to criminal prosecution. And the rapid rise in cumulative spending of intelligence agencies indicates that they are paying very close attention.”

There is currently no information regarding the success of the investigations nor how many people have been arrested based on blockchain analysis.


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