A public-private partnership with blockchain analytics firm Chainalysis has played a key role in helping the Internal Revenue Service solve cryptocurrency-related crimes.
Blockchain analysis has been key in helping the United States Internal Revenue Service (IRS) seize an estimated $10 billion worth of cryptocurrency since it began investigating a broad body of crimes involving digital assets.
This was a key point raised by IRS Criminal Investigations (IRS-CI) Chief Jim Lee in a wide-ranging, exclusive interview with Cointelegraph in Amsterdam. Lee was among a variety of delegates from public and private institutions sharing knowledge and insights at blockchain analytics firm Chainalysis’ Links conference held in the Netherlands.
Lee, alongwith with a cohort from the IRS-CI, gave an inside look at how the enforcement agency has tackled the use of cryptocurrency and digital assets in a wide variety of financial crimes that fall under its purview.
Chief Lee has served as a special agent with the IRS for 28 years and has been at the helm of the unit since 2020. In the years leading up to his tenure, the IRS-CI has found an increasing amount of criminal investigations involving digital assets in varying degrees land on the desks of its agents.
Stay in the know on crypto by frequently visiting Crypto News Today
The IRS’ relationship with the cryptocurrency space began in earnest in the early 2010s as Bitcoin (BTC) began to proliferate its way into the monetary system as an alternative, decentralized means of holding and transferring value.
As Lee explained, the IRS’ efforts to build infrastructure to combat identity theft around 2011 preempted its effort to begin investigating crimes involving digital money:
“When cryptocurrency came into the picture, we were already thinking about digital crimes and money trails using Web2.”
However, the organization’s ability to understand, investigate and eventually prosecute and seize cryptocurrencies and digital assets became dependent on tools developed by private institutions.
Advertisement
Follow GappyCoin PreSale on Twitter, and ReCap for information and more.
The IRS-CI is one of hundreds of law enforcement and government agencies that make use of a specific suite of blockchain analysis tools that have been developed by Chainalysis. The company was established in 2014 and has become a lynchpin for blockchain-based investigations around the world over the past decade.
For the IRS, the partnership with Chainalysis has become invaluable, with Lee stressing that his unit’s efforts to investigate crypto-related crimes would be near ‘impossible’ without the infrastructure and tools it now has access to. The public-private partnership with Chainalysis hinges on investing in technology that can help trace crypto and manipulate data from public blockchains to darknet marketplaces.
“Think about all the data that I have working for the IRS. It may not be the most, but it’s the richest. Now I can take all this other data we have and then match it up against the records that I have. I mean, it’s just incredibly powerful, but it takes time, energy and money.”
Even with the tools at its disposal, Lee admits that investigating crimes involving digital assets is a difficult undertaking. Investing in people, data and technology has been key in its efforts to combat crypto-related crime:
“When we’re talking about the crypto space, the way I look at it is data and technology combined. It takes significant investment because you can’t just get those results. You can’t just seize $10 billion in value.”
While the market value of seized cryptocurrency in the IRS’ vaults has dropped in value from an estimated $10 billion at seizure, the institution still has to figure out how to safely hold billions of dollars of digital assets.
It’s a complex issue for the IRS-CI Chief, who highlights simple considerations for cryptocurrency custody which becomes increasingly stressful when dealing with huge sums of digitized value:
“Where do I store it? On chain or off chain? Do I keep it in my office? Do I lock up the seed phrases elsewhere? We’re talking about a lot of money.”
The IRS-CI investigations have been fruitful, with the department frequently becoming the largest contributor to the U.S. Treasury asset forfeiture fund in recent years. The seizure of $3.6 billion involved in the 2016 Bitfinex hack is a prime example of the efforts of Lee’s unit to track down stolen funds.
Another key part of the IRS CI’s mandate is sharing knowledge and skills to use tools like Chainalysis Reactor with local and international crime enforcement, which is chiefly aimed at powering financial crime investigations.
Part of Lee’s visit to Europe in May 2023 was to facilitate the training of over 60 different Ukrainian officials from a variety of law enforcement agencies. IRS-CI also donated Chainalysis Reactor licenses to Ukrainian law enforcement, which will help facilitate blockchain and cryptocurrency tracing amid the ongoing Russian-Ukrainian conflict.
Read More at COINTELEGRAPH
We hope you found this article insightful. Before you go, please consider supporting CryptoCaster’s independent journalism.
In the world of media owned by billionaires like Elon Musk, Larry Fink (BlackRock), and Jamie Dimon (JP Morgan Chase), influence over narratives surrounding cryptocurrency and Web3 often reflects their interests. CryptoCaster is different. With no billionaire backers or shareholder obligations, we are committed solely to public interest journalism, covering crypto advancements and institutional changes without profit-driven motives.
Unlike much of mainstream media, which can fall into neutrality traps that obscure the real impacts on retail investors, we’re guided by transparency and integrity. We are unafraid to take a stand in the ongoing struggle against fiat banking dominance and in support of the monetary innovation driven by crypto and Web3. Reporting on issues like FTX, Binance, and Ripple, we bring a bold, unfiltered outsider’s view on global financial disruption—free from the constraints of traditional media narratives.
CryptoCaster remains paywall-free, accessible to everyone, thanks to the support of readers like you. Your contributions keep us independent and help ensure that critical information on the crypto landscape reaches all. If you value our work, please consider supporting us with a one-time contribution starting at just $1 in Bitcoin or Ether, or even monthly if you’re able. Scroll down to find our wallet addresses and help keep CryptoCaster independent and thriving.
Thank you for your support,
Kristin Steinbeck
Editor, CryptoCaster
Please Read Essential Disclaimer Information Here.
© 2024 Crypto Caster provides information. CryptoCaster.world does not provide investment advice. Do your research before taking a market position on the purchase of cryptocurrency and other asset classes. Past performance of any asset is not indicative of future results. All rights reserved.
Contribute to CryptoCaster℠ Via Metamask or favorite wallet. Send Coin/Token to Addresses Provided Below.
Thank you!
BTC – bc1qgdnd752esyl4jv6nhz3ypuzwa6wav9wuzaeg9g
ETH – 0x7D8D76E60bFF59c5295Aa1b39D651f6735D6413D
CRYPTOCASTER HEATMAP
