Cryptocurrencies and blockchain technology go hand in hand with privacy, and the privacy factor was the reason why these next-gen technologies took off in the first place. However, recent times have seen bad actors misuse this very property of digital assets as a tool to evade the government, and this has compelled authorities to looks for ways to be able to track these transactions.
The latest news comes from the United States Internal Revenue Services (IRS), as it is offering a whopping $625,000 bounty for anyone who’s able to penetrate the untraceable privacy coins Monero (XMR) and also trace transactions on the lightning network for Bitcoin.
According to the proposal published last week, the IRS will be accepting working prototypes until September 16. Selected applicants will be receiving an initial grant of $500,000.
This grant is set to allow applicants to continue developing their prototype into a working concept over a span of the next eight months. Upon successful completion of a pilot approved by the government, the applicants will receive another $125,000.
“IRS-CI is seeking a solution with one or more contractors to provide innovative solutions for tracing and attribution of privacy coins, such as expert tools, data, source code, algorithms, and software development services.”
The announcement comes as a part of the IRS’s efforts to develop a tool that helps IRS Criminal Investigation (CI) special agents catch criminals by tracing transactions by identifying wallets transaction dates and times, and amounts transferred. The tool is expected to be able to predict the future transactions of flagged addresses.
The IRS also wants to ensure that the final product must grant the CI complete control of the tool along with the ability to further develop or modify them, so the organization won’t have to rely on any external vendors.
A bid to fight crypto-crime
Privacy coins have become quite popular among criminals as it helps them to cover up their tracks and get away with illegally obtained funds. As a result, government agencies are working with private contractors like Chainalysis to develop new ways to mitigate these crimes.
The IRS adds:
“Currently, there are limited investigative resources for tracing transactions involving privacy cryptocurrency coins such as Monero or other off-chain transactions that provide privacy to illicit actors.”
Meanwhile, Blockchain analysis firm CipherTrace announced last month that it has developed a tool that can supposedly track Monero transactions. While there have been no reports about the tool’s capabilities, it will supposedly be used by the U.S. Department of Homeland Security.