The U.S. Department of Homeland Security has put out a pre-solicitation request for tracing private transactions and performing blockchain analytics on cryptocurrencies, such as Zcash and Monero. The request was made to combat illegal and nefarious transactions on privacy-oriented blockchains.
On Nov. 30th, the U.S. Department of Homeland Security (DHS) issued a pre-solicitation notice for “Blockchain Applications for Homeland Security Forensic Analytics.” The application is requesting blockchain forensic analytics which can be used for tracing transactions on newer, privacy-oriented coins “such as Zcash and Monero.”
As stated in the government request:
“While these [anonymity and privacy] features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature.”
Additionally, the request indicates that the primary use of these methods would be law enforcement:
“…this proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions.”
Research and development done in this area would allow the DHS to perform “analysis of suspicious transaction[s].”
A pre-solicitation notice is the first-step towards providing government research grants. The Small Business Innovation Research program (SBIR) awards these kinds of projects up to $150 thousand for an initial proof-of-concept, and up to $1 million over the next two years for research and development of these projects.
During a pre-solicitation notice, the government has opened up a technical discussion and answer forum for those interested in participating in the program.
Law Enforcement and Privacy
The proposals have interesting ramifications for privacy-oriented coins, such as Zcash and Monero.
There are known privacy deficiencies in Bitcoin and Ethereum. Just last month, the U.S. Treasury Department linked two money-launderers to a Bitcoin address.