The United States Federal agency Internal Revenue Service (IRS) intends to track privacy cryptocurrency coins as well as Lightning Network but it is only possible with some investigative tools that can break into these networks. The federal agency does not have one at the moment but it has granted a contract of $625,000 to the blockchain analytic company Chainalysis for creating a tool for the agency which may help the agency in tracking privacy coins.
An investigative tool for tracking privacy coins
As per the official post, Chainalysis has finally received a $625,000 contract from the United States Internal Revenue Service agency after waiting for several days. Chainalysis will develop an investigative tool for the federal agency. This tool will be used by the IRS for tracking privacy coins such as Monero, Bitcoin (BTC) on the Lightning Network, second layer solutions, tumblers, and mixers.
The main intention of the IRS is to have a complete track record of all of the transactions-related activities that happen on privacy cryptocurrency coins such as Monero and on the Lightning Network. For doing that, the agency requires some investigative tools that can break into these blockchain networks. Therefore, it granted a contract to Chainalysis asking the company to develop a tool for this purpose.
However, the federal agency said in a statement that there are not sufficient investigative tools for tracking cryptocurrency networks. The agency said:
“Currently, there are limited investigative resources for tracing transactions involving privacy cryptocurrency coins such as Monero, Layer 2 network protocol transactions such as Lightning Labs, or other off-chain transactions that provide privacy to illicit actors.
The agency also said that it has some specific objectives behind using this investigative tool. One is to:
“Provide technology which, given information about specific parties and/or transactions in the Monero and/or Lightning networks, allows Special Agents to predict statistical likelihoods of other transaction inputs, outputs, metadata, and public identifiers with minimal involvement of external vendors.”
As per the post, apart from Chainalysis, the Internal Revenue Service also granted a contract to Integra FEC LLC, a forensic data analysis company based in Texas.