The U.S. government is seeking development of ways to forensically track privacy-focused cryptos like Monero and Zcash.

One of the main traits of cryptocurrency is its supposed anonymity. However, Bitcoin and other major virtual currencies can be easily traced, which has led to the creation of privacy-focused coins like Zcash (ZEC) and Monero (XMR). Such privacy is something that governments and law enforcement are not big fans of, which is why the Small Business Innovation Research (SBIR) of the Department of Homeland Security has put out a call to companies to create ways for law enforcement to create forensic analysis techniques to track transactions using such privacy-focused cryptocurrencies.

Monero and Zcash in the Crosshairs

The SBIR has released a pre-solicitation document detailing this request. The objective of this program is to “design a product to support the implementation of block chain based forensics, data analysis, and information sharing.”


The document specifically names Monero and Zcash as the type of cryptocurrencies the U.S. government wishes to be able to track. The government agency notes the privacy factor associated with this type of cryptocurrency, stating:

A key feature underlying these newer blockchain platforms that is frequently emphasized is the 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. To that end, this proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions.

Three Stages of Development

The program features three distinct phases for development. Phase I is to design a blockchain system or modify an existing one to allow for forensic analysis by law enforcement. Architecture should be produced to show how system components can be upgraded or interchanged for use in newer blockchains coming into use.

Phase II features a working prototype that will demonstrate the forensic techniques on the blockchain on three use cases determined by the Department of Homeland Security. These use cases will analyze suspicious transactions without external data, with external data, and on another blockchain platform.

Phase III will see the implementation of this forensic analysis system and its spread across many local and federal government agencies, as well as commercial companies. As the document notes:

These technologies stand to radically transform operations in government and the private sector. Because of the significant impact in areas such as governance, data sharing agreement enforcement, and encrypted analytics interchanges, there are a wide variety of applications in government and the commercial marketplace that can benefit from successful product development. Blockchain forensic analytics for the homeland security enterprise can help the DHS law enforcement and security operations across components as well as state and local law enforcement operations. Private financial institutions can likewise benefit from such capabilities in enforcing “know your customer” and anti-money laundering compliance.

It seems that the U.S. government is pretty serious about being able to track privacy-focused cryptocurrencies. Those who enjoy using Zcash and Monero may eventually want to look for other coins to use if they wish to keep government eyeballs off their transactions. One thing is certain – new blockchains will be developed to maintain privacy, which means the ongoing back-and-forth between governments and privacy advocates will continue.

What do you think about this new DHS program? Let us know in the comments below.

Images courtesy of Shutterstock.

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