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DHS Pre-Solicitation Explores ‘Forensic Analytics’ for Privacy Coins

Distributed Summary:

  • A document from the U.S. Department of Homeland Security explores the ability to implement blockchain-based forensics and data analysis
  • It singled out the privacy coin platforms Zcash and Monero as ones to analyze
  • Outlines a plan that would yield “commercial or government applications”

The U.S. Department of Homeland Security (DHS) has begun making inquiries into the practicality of tracking privacy coin transactions, according to a pre-solicitation document on its website.

The document came from DHS’ Small Business Innovation Research Program, which listed many potential topics of inquiry for the DHS. Its header noted, “This notice is not a solicitation or Request for Proposals. This notice is merely an opportunity for interested parties to comment on or request information about the attached topic areas.”

Even though the release of this document does not commit the DHS to any concrete action, its interest in tracking privacy coin transactions should raise some alarms for the cryptocurrency space. Specifically, its stated objective is to “design a product to support the implementation of [blockchain-based] forensics, data analysis, and information sharing.”

This proposal also details some of the DHS’ previous, if limited, forays in the space and indicated interest in ways of analyzing privacy-focused cryptocurrency platforms.

“Prior efforts have addressed Bitcoin analytics, which covers only a limited scope within the realm of cryptocurrencies,” the document reads. “This proposal seeks applications of blockchain forensic analytics for newer cryptocurrencies, such as Zcash and Monero. And, ongoing research within the field also contributes to new technological implementations and techniques that continue to multiply the specific types of consensus, privacy, security, and proof mechanisms.”

The document went on to further highlight blockchain technology’s “capability for anonymity and privacy protection. While these features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature.”

With the federal government likely wary of this capability, the DHS proposal calls for “solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions,” with the added request that “the desired solution should either attempt to show generality or extensibility, or at least provide working approaches to treating newer blockchain implementations.”

The plan outlines three distinct phases to tamper cryptocurrency’s ability to thwart oversight of transactions, ultimately yielding “commercial or government applications.”

It is uncertain at this point if the DHS will pursue the request to make this analysis ecosystem, but it can be assumed that its specialists are technically competent enough to make one, should this pre-solicitation lead to any formal action.

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