The US Department of Homeland Security (DHS) is interested in acquiring technology solutions that can track newer cryptocurrencies, such as Zcash and Monero.
According to a pre-solicitation document [PDF], the DHS wants to know if this is possible, before filing an official solicitation request later down the line.
The DHS said that "prior efforts have addressed Bitcoin analytics," but now the agency and the law enforcement agencies under its supervision are looking into similar cryptocurrency analytics solutions that can be used to track so-called privacy coins --cryptocurrencies that support anonymous transactions.
"A key feature underlying these newer blockchain platforms that is frequently emphasized is the capability for anonymity and privacy protection," the DHS document said. "While these features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature."
"This proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions," the DHS added.
The DHS specifically mentions the Zcash and Monero privacy coins in its pre-solicitation request. For the past few years, Monero has been the second-most popular cryptocurrency on the Dark Web, after Bitcoin.
It's support for anonymous transactions, but also its low mining difficulty, have also made it extremely popular with crypto-mining malware operators as well, being the preferred cryptocurrency mined by most cryptojacking botnets.
Previously, US law enforcement has had great success in tracking Bitcoin transactions. While Bitcoin is cryptographically secured against external tampering, Bitcoin transactions are not private, being recorded in a public ledger.
By tracking these transactions US authorities, with the help of the private sector, were able to determine that 95 percent of all ransomware ransom payments were cashed out and converted into fiat currency through the BTC-e cryptocurrency exchange. US authorities issued an international arrest warrant for the owner of the BTC-e portal, but they later lost an extradition battle with Russia.
Now, if the DHS receives positive feedback and its agents will get their hands on tools that can track Monero transactions through exchanges and to fiat currency accounts, one can expect a slew of arrests to come in the coming years. Nonetheless, all this depends on the private sector's ability to track and demystify the transactions of some of these privacy coins, which, currently, is highly unlikely.