British Tax Collectors Put Contract Out on Crypto Evaders

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Her Majesty’s Revenue & Customs has posted a contract for technology to help it track blockchain tax cheats.

HMRC Seeks Blockchain Tracker

The contract posting reads, in part:

Provision of a tool that will support intelligence gathering methods to identify and cluster Cryptoasset transactions into linked transactions and identify those linked to Cryptoasset service providers.

The agency is willing to spend 100,000 pounds on the technology it seeks, which could be provided by an existing firm such as Chainalysis.

Britain and other countries have an increasing interest in being able to tax people who use cryptocurrencies properly. The onset of privacy coins like Monero have made it even more difficult to track transactions, according to agencies like Europol.

Chainalysis and a few other firms are part of a growing industry that works to track blockchain transactions. The firm has noted that as much as $2.8 billion in illicit Bitcoin is transacted annually through crypto exchanges.

The British government specifically wants to be able to link transactions between trading houses and traders, while other governments may want even more data.

Privacy Coins In The Age of Blockchain Surveillance

Transparent blockchains like Bitcoin provide a lot more data to researchers than do privacy-centric projects like Monero or Zcash, which both provide a great deal of masking. The masking is intended to provide permissioned data: while anyone can verify the value of a transaction, so as to know the trueness of the blockchain in question, they have to have certain keys to know more details.

Bitcoin, Ethereum, and other traditional blockchain systems actually provide a great amount of detail out in the open. While Ethereum has a number of ways that its transactions can be hidden, including through third-party dApps built on the blockchain itself, Bitcoin by default doesn’t hide much from anyone looking.

Britain has reportedly been rising to the task of fighting cybercrime, with a whole division dedicated to combating crypto and other types of criminals.

Cryptocurrency, in the eyes of law enforcement, is deeply intertwined with the dark web, which in and of itself entails a number of types of criminal activity.

The tax agency’s listing closes on the 31st of January. If possible, we’ll report back when details of the closing become available. Presumably, an organization which already has expertise in the field of tracking blockchain transactions, such as Chainalysis, will win the contract.

As we move into the future, it seems obvious that most blockchain transactions will be much more traceable. Even if the majority of all Bitcoin users use some form of built-in privacy filter, such as in-wallet mixing, the odds are high that companies whose job it is to track blockchain transactions will get better at it.

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