Can Bitcoin Conversions Be Traced?
Every time a criminal or pirate convert digital currency to government issued ones it creates a âvulnerabilityâ according to an official with the US Immigration and Customs Enforcement.
Letâs consider that from the start, Bitcoin and cryptocurrency in general was designed with privacy and anonymity in mind, therefore these latest findings may come of some concern to those who have used Bitcoin illicitly in the past. Is crypto really as private as we think?
The assistant director of domestic operations with the HSI (Homeland Security Investigation), Matthew Allen spoke about the role of digital currencies in drug trafficking during a hearing held on October 3rd in front of the US Senate Caucus on International Narcotics Control.
In Allen's prepared statement he said:
âOn darknet marketplaces and other âunindexedâ websites, purchases are often paid for with cryptocurrencies such as Bitcoin and Monero, among many others.â
Allen went on to note that the HSI is being relatively successful in tracking criminals who use digital currencies to launder the profits from drug sales.
Despite the ease that comes from transferring crypto value, Allen said that criminals will still need to convert their crypto into fiat and vice versa.
âWhatever monetary exchanges are made, a vulnerability is created. This is when criminals are most susceptible to identification by law enforcement by law enforcement means and methods.â
Allen went on to say:
"Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and blockchain analysis, ICE-HSI is able to disrupt the criminals and dismantle the [transnational criminal organizations], as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting darknet marketplaces."
Allen discussed several forms of cryptocurrency exchanges and how they might be used for the wrong reasons including money laundering. Peer-to-peer exchanged are particularly notorious for this, startups which refuse the register as a money services business.
However, national and international organisations are building up investigators to find out the best way to trace digital currencies such as Bitcoin and Ethereum.
"We train investigators ... in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics."