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Six US Government Agencies Hire Investigative Blockchain Firm Chainalysis



De Silva

ETHNews has uncovered a nearly $1 million web of partnerships between Chainalysis and the US Government. Federal entities that have hired the investigative blockchain firm include the FBI, IRS, SEC, DEA, ICE, and the Bureau of the Fiscal Service.

It’s been said that crime doesn’t pay. But catching criminals pays pretty damn well, at least for Chainalysis, a company that has amassed a small fortune through government contracting and providing services and identification tools to financial institutions interested in cryptocurrency. According to the company, it has checked over $15 billion worth of bitcoin transactions for its customers. Over the last three years, through its contracts with major government agencies and departments, Chainalysis has quietly collected nearly $1 million.

Through a careful search of the US General Services Administration’s Federal Procurement Data System, ETHNews discovered that Chainalysis provides its services to an assortment of US government entities, including the Federal Bureau of Investigation (FBI), Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), Drug Enforcement Administration (DEA), Immigration and Customs Enforcement (ICE), and the Treasury Department’s Bureau of the Fiscal Service.

The earliest contract listed was on August 14, 2015, when Chainalysis was hired by the FBI. Since then, the bitcoin blockchain explorer, which grew out of Wallet Explorer, has signed deals with various federal agencies totaling approximately $950,000.

Federal Procurement Data System Chart

The most recent contract is between the IRS and Chainalysis, but readers should take note of another collaboration that also flew under the radar. On July 19, 2017, the SEC struck a deal with the firm. The listed agreement is for slightly less than $40,000, although the contract includes options that could make it worth as much as $200,000. In light of the Commission’s recent guidance that tokens from The DAO would have qualified as securities, it’s clear that the agency is taking proactive steps to identify token transactions that might fall under its jurisdiction.

ETHNews reached out to the SEC, which offered “no comment” the matter.

Operators of cryptocurrency exchanges and founders of blockchain-based companies that have held (or want to hold) token offerings would be smart to file this information away. Despite the SEC’s radio silence about other tokens that qualify as securities, the agency might be preparing a full slate of enforcement actions related to securities fraud, pump-and-dumps, and Ponzi schemes. For tokens that function as investment vehicles, ensuring compliance will be critical. It’s not yet clear how utility tokens will be regulated.

The interests of the FBI and IRS are easy to understand, and their connection to Chainalysis is obvious. The FBI is concerned about potential money laundering and terrorism financing related to cryptocurrency. The IRS is similarly worried about money laundering and tax evasion. However, the arrangements Chainalysis has with the DEA and ICE are less straightforward.

The DEA deal is likely geared toward drug purchases or sales conducted using cryptocurrency. Long-time blockchain enthusiasts will remember that the DEA figured prominently in the takedown of Silk Road. ICE, a law enforcement agency in the Department of Homeland Security, is probably focused on how cryptocurrency could impact the domestic economy or how virtual currencies are used for remittances. Chainalysis could help the two agencies trace criminals through their virtual finances.

Lastly, the Bureau of the Fiscal Service’s Administrative Resource Center’s Procurement Division is the contracting office that spent a significant portion of the Treasury Department dollars. As much as cryptocurrency aficionados have hoped for a government-backed, blockchain-based dollar, that doesn’t seem to be where the money trail leads so far. Sadly, the money spent by the Treasury Department is not going toward the development of a national blockchain-based currency.

Altogether, these findings indicate that the federal government might be farther along the regulatory development curve than previously believed. While many have criticized the IRS for its lethargic approach to providing virtual currency guidance, the tax agency was actually one of the first to put some skin in the game. Other departments and agencies, like the SEC, are the ones that have been playing catchup as the taxman leads the charge.

ETHNews reached out to Chainalysis for details about its contractual relationships with the government agencies, but its representatives have yet to respond.

As the Government’s partnerships with Chainalysis become common knowledge, it will be interesting to see how the cryptocurrency community’s perception adjusts. Even as virtual currency removes government from the issuance of money, it has certainly attracted regulatory interest. Privacy, freedom of speech, and financial security remain major discussion points as the Government dips its feet into the world of virtual currency.

Matthew De Silva

Matthew has a passion for law and technology. He graduated from Georgetown University, where he studied international economics and music. Matthew enjoys biking and listening to tech podcasts. He lives in Los Angeles.

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