Why Bitcoin is Better for Crime Fighters Than Criminals by Jason Weinstein
Published on April 4, 2016 - Coindesk
Jason Weinstein is a partner at Steptoe & Johnson LLP and a former deputy assistant attorney general in the Department of Justice in charge of cybercrime and organized crime.
So wait, it’s not anonymous?
It’s often said that bitcoin is not really anonymous, but rather pseudonymous.
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But as with banks, law enforcement would be able to obtain information about the address user by serving a subpoena or other lawful process. That’s one of the reasons we have seen, and will continue to see, enforcement actions taken at the "on ramps" and "off ramps" of the blockchain – to incentivize exchanges and wallet services to maintain compliance, so data will be there when law enforcement serves the subpoena.
But what if someone obtains bitcoins through a source other than a licensed exchange? What if the individual uses techniques for enhancing anonymity – like multiple addresses, or mixing services? Even then, the individual is not truly anonymous.
Of course, the individual may leave a trail when exchanging bitcoins (however obtained) into fiat currency. But the individual may also leave a trail while engaging in transactions on the blockchain.
There are existing and rapidly improving techniques to help link those users to their bitcoin addresses and transactions using, among other things, analysis of transaction patterns to make connections among multiple addresses used by the same individual; mining (no pun intended) of data from social media and public sources; and analysis of IP addresses used to conduct transactions.
As for mixing services, individuals who rely on them are making a leap of faith, trusting that the service won’t cheat them and that the service isn’t keeping records that could be obtained by law enforcement. And of course, the bitcoins you get back from the service could themselves be dirty and be on law enforcement’s radar.
And here’s the real attribution advantage: the traceability, searchability, and permanence of the blockchain.
Whether a law enforcement agent identifies the owner of an address tomorrow or two years from tomorrow, the agent will then be able to trace back every transaction involving that address, all the way back to the beginning.
Moreover, because the ledger is publicly accessible, law enforcement does not have to worry about what type of legal process is required to access the data. And because the ledger is borderless, law enforcement can get the data without having to go through a foreign government. That gives law enforcement the data it needs to "follow the money" in a way that would never be possible with cash.
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And law enforcement’s capabilities in this area will only improve over time, particularly as new analytics tools are developed.
Of course, innovators are coming up with new ways to increase privacy, whether on the bitcoin blockchain or through other types of cryptocurrencies, so law enforcement will continue to have to evolve and adapt to meet the challenges of new technology.
Read more: http://www.coindesk.com/bitcoin-cops-criminals/ (Why Bitcoin is Better for Crime Fighters Than Criminals - CoinDesk)