Can Intelligence Agencies Track Who Owns Crypto Assets?

When Bitcoin (BTC) and other cryptocurrencies emerged, one of the most attractive features of these digital assets was their decentralized nature and the anonymity they conveyed. Contrary to fiat money, cryptocurrencies are not regulated or issued by a central bank. Hence, transactions take place peer-to-peer (P2P) without the obligation to reveal the identities of the parties. All the blockchain records are the addresses of the wallets involved. Some privacy-oriented coins like Monero obscure this information, making it more difficult to track transactions.

Malicious players can exploit this anonymity of transactions for money laundering, purchases of drugs, financing of terrorism, and other illegal activities. Most cryptocurrency users are law-abiding citizens who regard this anonymity as an advantage for personal safety and other legit reasons. But law enforcement agencies have grown increasingly worried about the difficulty of tracking illegal crypto transactions. However, it has been demonstrated that intelligence agencies investigating cryptocurrency transactions can successfully uncover malicious crypto users.

For example, the arrest of Ross Ulbricht, an American citizen who created a marketplace for illegal drugs on the web, led to the seizure of nearly 30,000 BTC worth $20 million in 2013. Currently, Ulbricht is serving a life sentence in federal prison. In March 2015, $40 million in stolen Bitcoin was confiscated from Czech national Tomáš Jiříkovský. More cases followed that year. In September 2015, American citizen Trendon Shavers pleaded guilty to running a $150 million Ponzi scheme using Bitcoin.

How were these people arrested? In other words, how can intelligence and law-enforcement agencies track who owns crypto assets? Intelligence agencies can use deceptive and very audacious methods to collect information from their targets. For example, the Crypto AG story, published in 2020 by the Washington Post, exemplifies this type of operation.

Reportedly, during the cold war, the Swiss firm Crypto AG sold encrypted communication devices to governments and militaries of different countries. Unknown to those using these devices, Crypto AG was secretly owned by the CIA and the BND, the West German intelligence agency. Through a backdoor in the said communication devices, these intelligence agencies could spy on anyone using those devices.

Can private crypto transactions be spied on similarly? Nobody knows for sure. However, one cannot rule out the possibility that an intelligence agency runs one of the thousands of cryptocurrencies in circulation, akin to the Crypto AG case.

Can the CIA or NSA Spy on Your Crypto Transactions?

In 2018, CoinTelegraph published a news story revealing that the US National Security Agency (NSA) has been working on ways to identify cryptocurrency users. Accordingly, this information is part of Eric Snowden’s leaks of governmental secrets. Allegedly, the NSA utilizes secret Internet surveillance programs, allowing them to link Bitcoin wallets to users.

The NSA focused on Bitcoin and LibertyReserve, the latter a cryptocurrency created for criminal purposes that has already been shut down. A program disguised as anonymizing software harvests, analyzes and processes raw global Internet traffic to collect a significant amount of Bitcoin user data, including passwords, browser history, and MAC addresses of devices used for transactions.

If this news story is true, it is safe to assume that the CIA or NSA can uncover the identity of the owner of a specific Bitcoin wallet. It is not an easy task, though. Linking a crypto wallet address to a person requires a lot of forensic analysis and investigation. However, as several high-profile cases have demonstrated, these agencies can do it.

FAQ

Is the CIA behind crypto?

It is unlikely. Cryptocurrencies are decentralized assets not owned or controlled by a central entity. However, it could be possible that the CIA runs a cryptocurrency with rigged software to spy on transactions. But there are thousands of other cryptocurrencies in circulation nowadays. While one might think the CIA is behind one or a few cryptocurrencies, it is almost impossible this agency is behind the entire crypto market.

Can the FBI track Bitcoin transactions?

The Bitcoin blockchain was designed to be transparent and easy to audit. Therefore, tracking transactions on the Bitcoin network is straightforward. The FBI could easily know the addresses of wallets involved in a transaction as well as the amount transacted. However, linking a wallet address to the owner's identity is much more complicated. However, one can assume the FBI has the technical resources to do the necessary forensic analysis to uncover a Bitcoin wallet owner’s identity.

Can the government see crypto transactions?

Most crypto blockchains are transparent; therefore, governments can see crypto transactions on a cryptocurrency network. However, privacy-oriented coins like Monero make it more challenging to see crypto transaction details. If anonymity is one of your primary concerns, you can buy and sell cryptocurrencies on LetsExchange.io. Our platform does not require you to provide any personal or financial information to transact.


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