At a hearing of the U.S. Senate Caucus on International Narcotics Control, Matthew Allen of Homeland Security discussed how the government can catch criminals who use cryptocurrencies to move money. While the hearing was focused on combating the illegal fentanyl trade, Allen made some intriguing remarks about cryptocurrency, particularly with respect to secrecy, anonymity, and the privacy of transactions. "Despite the pseudo-anonymity and ease of transfer exploited by the users of bitcoin and other virtual currencies, criminals still need to convert their cash into virtual currency or their virtual currency into cash. Whenever monetary exchanges are made, a vulnerability is created," he said.
Allen went on to note this is when criminals can be identified and caught by law enforcement. He said the agency is doing work like blockchain analysis, presumably to understand flows of funds. ICE is concerned with illegal transactions and the exchanges that support them. But he also made clear that exchanges which comply with know-your-customer laws and anti-money-laundering rules are used by "legitimate users ... more than willing to provide personal identifying information and traditional financial institution account numbers in exchange for security, the lowest fees, and the ease of processing transactions."
In all, the testimony implied a rather sophisticated view of cryptocurrency, free of the demonization of the technology we might have seen a couple of years ago. The government is aware of exchanges that facilitate peer-to-peer crypto exchanges and other forms of anonymity, which might be misused to cover illegal activities. "We train investigators from national and international agencies in cryptocurrency investigations in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics." he said. (Hat tip: Coindesk)