Being rewarded for becoming a pirate – The US tax authorities seem strongly annoyed at the idea of not being able to monitor all crypto transactions, the purpose of which is precisely to better preserve the privacy of their users. The Internal Revenue Service (IRS) has just launched an offer to de-anonymize these transactions, with no less than $ 625,000 at stake.
Monero, a haunt of malicious actors for the IRS?
After the Pentagon and the Securities & Exchange Commission (SEC), it is now the Internal Revenue Service which is launching a call for tenders to further improve the supervision of cryptocurrencies .
In the explanatory note of the offer, the IRS notes that currently, the investigative tools of the American authorities are too „limited“ to be able to trace anonymous transactions .
This applies both on blockchains anonymously vocation as Monero (XMR) or second layer solutions such as network Lightning of Bitcoin
Regarding Monero, it is above all the increase in ransomware that concerns the US tax service. In fact, the hackers behind this malware now demand more ransom payments in XMR :
“The use of privacy-focused cryptocurrencies is growing, and there is also an increase in their use by illicit actors. For example, in April 2020, a RaaS (Ransomware as a Service) group called Sodinokibi (or REvil) said that future ransom demand payments will be in Monero (XMR) rather than Bitcoin (BTC) ( …). “
Sidechain and off-chain transactions also in the IRS ’sights
All of the second-layer solutions also seem to be of concern to the US tax authorities.
Indeed, although Lightning Labs is developing a monitoring application for Bitcoin’s Lightning Network (LN) (called Lndmon ), the IRS explains that there is no such means of monitoring for „other distributed ledgers (for example). example, the Litecoin blockchain), Raiden Network (on the Ethereum platform), etc. “ .
However, the IRS wants to be able to investigate all potentially illicit activities of these networks parallel to the main blockchains.
This is why the tax administration wishes to finance a project in 2 phases, for a total of 625,000 dollars . The first phase will consist of presenting the proof of concept of a tool that would make it easier to trace all the types of transactions mentioned above. Phase 2 will then consist in carrying out pilot tests of this monitoring software.
Interested developers and companies have until September 16 to apply.
If the IRS achieves these ends, it will take away much of the interest inherent in anonymous cryptocurrencies, like Monero. Although a little less serious for second-layer solutions (because the scalability / speed of transactions is the main interest), it will deprive them of an asset that was precisely lacking in their main blockchain.