US Government Takes Fight Against Privacy Coins a Notch Higher

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US Gorenment against cryptocurrency.
The Department of Homeland Security is interested in tracking cryptocurrencies focused on privacy, such as Monero and Zcash.

The U.S. Department of Homeland Security is interested in tracking privacy coins such as Monero and Zcash.

These coins are much more “private” than Bitcoin, and as such, pose a much larger threat to law enforcement, as they believe that illegal activity involving these cryptocurrencies cannot currently be tracked.

Privacy and Bitcoin

One of the reasons that cryptocurrency was able to evolve into where it is today is due to the cypherpunk movement, which advocated that privacy is a right.

In fact, the Cypherpunk Manifesto explicitly states that privacy is necessary for an open society in the digital era.

It requires anonymous transaction systems that empower individuals to reveal their identity only if and when they want to.

It is no secret that when Bitcoin was first created, that many people believed that it would appeal to criminals who hope to avoid a financial system that could potentially track their criminal activity.

Your TOR usage is being watched

Bitcoin soon became synonymous as the currency used for Silk Road, a dark web marketplace that was heavily involved in drug sales.

Silk Road was eventually shut down by the Federal Bureau of Investigation in 2013, and various figures involved with the website were arrested.

While many people had heard of Bitcoin, there was nowhere near the level of awareness surrounding the digital asset that exists today.

In addition, over time, especially after Silk Road shut down, the cryptocurrency community has managed to uphold the principles of privacy and civil rights, while recognizing that Bitcoin could never be properly regulated as long as it was constantly associated with criminal activity.

The Rise of Privacy Coins

Privacy coin Monero.
One of the reasons that cryptocurrency was able to evolve into where it is today is due to the cypherpunk movement, which advocated that privacy is a right.

Of course, there are thousands of cryptocurrency projects that are introduced every year, and since it was very clear that law enforcement agencies could effectively track Bitcoin—that caused other privacy-focused projects to rise.

One of those projects is Monero, which was created in April 2014.

Monero boasts an obfuscated public ledger to keep transactions truly anonymous in a manner that is no longer possible with Bitcoin.

In fact, in the first half of 2018, Monero was used in almost half (44 percent) of cryptocurrency ransomware attacks.

Monero gained the most traction in 2016, where it grew tremendously in terms of market capitalization, and became widely used in the dark web, where it gained more of a reputation of being the cryptocurrency of choice for drug dealers and hackers.

Another project that emerged is Zcash, where transactions can be “shielded.” The project is also focused on privacy, as well.

Interestingly enough, Zcash as a company has maintained that they do not intend to encourage criminal activity, and have even hosted virtual meetings with law enforcement agencies to start a discourse about the issue.

DHS Interested

The Department of Homeland Security is focused on public security in general, as the government agency was created in the wake of the September 11 attacks.

It is also afforded a generous budget. For example, its budget for 2017 was over $40 billion dollars.

It is probably not too surprising that DHS has become interested in tracking privacy coins, considering that they could be used to finance terrorism or launder money for crime organizations that could pose a threat to national security.

A pile of cryptocurrencies.
The U.S. Department of Homeland Security is interested in tracking privacy coins such as Monero and Zcash.

A recently posted DHS innovation research pre-solicitation document pointed out that the emphasis on privacy and anonymity within the cryptocurrency community has led to quite the conundrum when it comes to law enforcement.

It specifically acknowledges that newer cryptocurrencies contain a capability for anonymity and privacy protection, and while these features are desirable, the DHS has an interest in tracing and understanding blockchain transactions that could be connected to illegal activity.

The document calls for innovative solutions from companies that could assist law enforcement investigations with forensic analysis on blockchain transactions.

It is unclear whether the DHS or a private corporation will find a way to begin tracking these privacy coins, although for the time being, that certainly doesn’t appear to be the case.

Jay Carter

Jay Carter focuses on technology, business, and cryptocurrency. He is interested in how the dark web can be a force for good, and how technology will shape our future overall.
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