Privacy is one of the key features that have led to the growth of the cryptocurrency industry. While almost all cryptocurrencies are secure, some tokens are designed to add that extra layer of privacy and one of the most popular privacy coins is Monero (XMR).
Monero alleviates privacy concerns using the concepts of ring signatures and stealth addresses. While this has been deemed as something that is hard to crack, crypto analytics firm CipherTrace claims it can identify XMR used for illicit purposes to support criminal investigations.
According to an announcement on November 20th, CipherTrace announced that it has filed two patents for a platform it believes is capable of tracing transactions for XMR, which is very often used by bad actors to launder illicit funds.
The blog post states that these patents include forensic tools to explore XMR transaction flows that will be implemented across several scenarios like aiding in investigations related to digital currencies, statistical and probabilistic methods for scoring transactions, clustering likely wallet owners, and visualization tools and ways to track stolen or illegally used XMR.
“CipherTrace’s Monero tracing capabilities will allow [Virtual Asset Service Providers] to identify when inbound XMR may have criminal origins, allowing them to adequately risk rate customer transactions per any required regulations,” an excerpt from the blog reads.
“[Our] goal is to enable the detection of criminal users, therefore increasing the safety and sustainability of privacy coins like Monero in the future.”
New tracking tools on the way
As of now, the authorities do not have the means to track stolen funds from hacks and ransomware attacks because the attackers tend to use XMR in these scenarios. In September, the Internal Revenue Service even offered a bounty of up to $625,000 to anyone who can break Monero. The contract was later awarded to blockchain analytics firm Chainalysis and Texas-based forensic data analysis firm Integra FEC.
In the case of CipherTrace, the company has stated that it is developing these Monero-tracing tools as part of a project with the U.S. Department of Homeland Security as it is looking for a way to identify XMR wallets, transactions dates, and times.
So far, there are no proofs of CipherTrace’s tracing tool’s capabilities. However, a Monero Outreach representative had previously stated that they would be “highly suspicious of any claims that corporations can trace Monero transactions” and any firm that did so would be unlikely to “trace the wallets or amounts for any transaction.”