US Authorities Can Now Track the Privacy-Focused Monero Cryptocurrency
The leading crypto intelligence firm CipherTrace has developed a toolset to assist U.S. law enforcement to track the privacy-centric Monero cryptocurrency
The cryptocurrency analytics firm CipherTrace has made the announcement that they have created a toolset designed to help trace transactions made using the privacy-centric Monero virtual currency – stating that they did so under contract with the U.S. Department of Homeland Security (DHS).
Looking Back at Monero vs. Bitcoin
Recently, Monero had gained significant traction for having a relatively dependable privacy-focused design that rivaled Bitcoin, pioneer of the cryptocurrency economy and the most popular virtual currency in the darknet.
Indeed, Bitcoin’s design does not match that of Monero, which boasts of a wide variety of features such as stealth addresses.
Bitcoin transactions can be traced easily and connected to the crypto senders’ addresses. Multiple law enforcement agencies and blockchain analysts can establish linkages to Bitcoin transactions that are made to the same address.
Unless a Bitcoin receiver chooses to open fresh wallet addresses for every transaction, the crypto’s attributes pose a serious anonymity issue. Otherwise, it would be very impractical for users to always create these new addresses every time they want to transact in Bitcoin.
Conversely, Monero ensures that when a user send money, they cannot know the source of such funds unless the sender informs them about the transaction. The fact that people cannot simply trace transactions is what has always brought out the desirable property of Monero’s stealth addressing.
Monero Can Now Be Tracked
A press release by CipherTrace stated that the goal behind development of the tracing tools was harnessed from the U.S. law enforcement need to track the transactions made across criminal networks using the Monero cryptocurrency.
The firm reflected on the fact that Monero has since grown to become the second most popular digital coin in the dark web – with estimate figures indicating that about 45 percent of dark web platforms have adopted Monero integration.
It is for the above reason that law enforcement interest has developed around the digital currency as the facilitator of darknet-backed cybercriminal enterprises. As mentioned already, Monero offers far better features than Bitcoin, including the ring signature mechanism to ensure user anonymity.
Ring signatures work to mix transactions so that when third party actors try to figure out the source of funds sent in Monero, it will appear as though multiple users participated in the transaction. The feature makes it virtually impossible for law enforcement agencies to identify the true sources of such funds.
The CipherTrace contract with the DHS Science & Technology Directorate led to creation of the tools that encompass transaction search, exploration, and visualization tools to expose traffic surrounding Monero transactions. The toolset will work in the context of Monero transaction flows that have CipherTrace’s Inspector financial investigations product.
Apart from meeting the law enforcement demand, the firm has said that the toolset will be attractive to crypto exchanges, OTC trading platforms, investment funds and other financial stakeholders to ensure that they sieve out Monero being sent from potentially illegal senders – an aspect that will reinforce their AML/KYC compliance.
Further, the company intends to add other functionalities to improve the already-developed toolset targeting the wide pool of stakeholders. Among the features considered include entity transactions clustering, wallet identification and exchange attribution.
While speaking to The Decrypt Daily, CipherTrace CEO Dave Jevans revealed the effectiveness of the toolset targeting Monero tracing.
The Chief Executive admitted the difficulty in tracing the Monero cryptocurrency in comparison to Bitcoin – but maintained that the current approaches will go a long way to provide law enforcement agencies with enough data to conduct the much-needed investigations in maintenance of law and order.
He added that the Monero tracing framework will function on probability as the firm does not have the means to identify actual individuals.
(written on a smartphone)