Article on Coinbase Tool for Identifying Owners of Cryptocurrency (7/7/22)

I am not steeped in the cryptocurrency craze.  Basically, I thought the attraction was the ability to do financial transactions in guaranteed secrecy, a feature particularly attractive to many such as money launderers and tax evaders.  I have had some posts on it.  See the Cryptocurrences tag here.  Still, I do not deal with cryptocurrencies in my practice or research.  So that is my caveat.

The following article caught my eye:  Sam Biddle, Cryptocurrency Titan Coinbase Providing "GEO Tracking Data" to ICE (The Intercept 6/29/22), here.  I thought some readers might be interested, so I pass it on.

Some excerpts:

            Coinbase Tracer allows clients, in both government and the private sector, to trace transactions through the blockchain, a distributed ledger of transactions integral to cryptocurrency use. While blockchain ledgers are typically public, the enormous volume of data stored therein can make following the money from spender to recipient beyond difficult, if not impossible, without the aid of software tools. Coinbase markets Tracer for use in both corporate compliance and law enforcement investigations, touting its ability to “investigate illicit activities including money laundering and terrorist financing” and “connect [cryptocurrency] addresses to real world entities.”

             According to the document, released via a Freedom of Information Act request, ICE is now able to track transactions made through nearly a dozen different digital currencies, including Bitcoin, Ether, and Tether. Analytic features include “Multi-hop link Analysis for incoming and outgoing funds,” granting ICE insight into transfers of these currencies, as well as “Transaction demixing and shielded transaction analysis” aimed at thwarting methods some crypto users take to launder their funds or camouflage their transactions. The contract also provides, provocatively, “Historical geo tracking data,” though it’s unclear what exactly this data consists of or from where it’s sourced. An email released through the FOIA request shows that Coinbase didn’t require ICE to agree to an End User License Agreement, standard legalese that imposes limits on what a customer can do with software.

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             Coinbase has in recent years made a concerted effort to pitch its intelligence features to government agencies, including the IRS, Secret Service, and Drug Enforcement Administration. Earlier this month, Coinbase vice president of global intelligence John Kothanek testified before a congressional panel that his company was eager to aid the cause of Homeland Security. “If you are a cyber criminal and you’re using crypto, you’re going to have a bad day. … We are going to track you down and we’re going to find that finance and we are going to hopefully help the government seize that crypto.” Coinbase’s government work has proved highly controversial to many crypto fans, owing perhaps both to the long-running libertarian streak in that community and the fact that these currencies are so frequently used to facilitate various forms of fraud.