The United States may have some of the world’s best cryptographers working for the National Security Agency and other spy shops, but the Internal Revenue Service (IRS) is crowdsourcing at least part of its effort to beat the algorithms that cloak information about certain cryptocurrencies.
The agency recently issued a request for proposals from anyone who can help track payments using the Monoro or Lightning protocols and similar approaches to hiding tracks.
“The use of privacy coins is becoming more popular for general use, and is also seeing an increase in use by illicit actors. For example, in April 2020 a RaaS (Ransomware as a Service) group called Sodinokibi (a former affiliate with the GrandCrab RaaS group) stated that future ransom request payments will be in Monero (XMR) rather than bitcoin (BTC) due to transaction privacy concerns,” the agency states in its RFP.
“Currently, there are limited investigative resources for tracing transactions involving privacy cryptocurrency coins such as Monero, Layer 2 network protocol transactions such as Lightning Labs, or other off-chain transactions that provide privacy to illicit actors,” the release states.
Among the assertions made in the RFP is that developers of successful cracking software will not have to disclose its inner-workings to the IRS.
As for why it’s using the unusual procurement method, the agency wrote in today’s release: “The federal government struggles at times with identifying ways to test, purchase and deploy innovative technology solutions. A large function of this is how long it takes to not only purchase the actual solution, but also test it, provide feedback and ultimately decide how (and whether) to deploy the solution. In other words, this is not simply a ‘how quickly can we buy it,’ but also a ‘how do we test it and decide whether or not to fund it for deployment.’ There are also times when the federal government prescribes a specific approach to a solution, and then asks who can do it best, and for the lowest price. This can limit innovation, and is often not the best approach when looking for emerging technologies and how their inclusion can benefit the government.”
The IRS request comes amid a broad discussion in banking and cryptology circles about the best approaches to cryptocurrency security.
Even the U.S. government, which has seen law enforcement work be complicated or thwarted altogether by cryptocurrencies, is exploring ways to create digital dollars.
