Larry Cermak
@lawmaster

1/ If you thought that the government wasn’t paying much attention to Bitcoin, you would be very mistaken. In fact, it is on top of what's going on now more than ever. How do I know? @DiarNewsletter analyzed how much the government is spending on blockchain analysis.

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2/ Not many people know but all the US government-wide procurement data is available for free here: fpds.gov/fpdsng_cms/ind…

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3/ As Bitcoin’s popularity continued to grow last year and the number of tx’s reached nearly 500k, the demand by government agencies for blockchain analysis consequently increased as well. So how much exactly is the US government spending on blockchain analysis?

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4/ According to Diar’s research, public records indicate that the US government agencies have entered purchase orders and contracts with blockchain analysis companies to the tune of $5.7Mn to date.

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5/ Since the beginning of the year, the amount that the government agencies paid to blockchain analysis companies more than tripled.

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6/ There are currently at least 9 companies performing blockchain analysis. The companies that are focused exclusively on blockchain analysis have collectively raised $28.8 Million to date.

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7/ The vast majority of government deals have been contracted to New-York based Chainalysis. Chainalysis is followed by Elliptic and CipherTrace. None of the other blockchain analysis companies have been directly cooperating with intelligence agencies in the US.

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8/ You might wonder which agencies are spending the most. No worries, I got your back! Unsurprisingly, the IRS has written the largest portion of checks accounting to 38% of the total spend. Yes, you might want to file your income taxes on bitcoin. IRS is paying attention.

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9/ The IRS, ICE and Federal Bureau of Investigations (FBI) have a combined 85% of the total spending. Full list:

IRS - 38%
ICE - 27%
FBI - 20%
Fiscal service - 6%
DEA - 4%
SEC - 3%
CFTC - 2%

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10/ What are these agencies tracking Bitcoin for? I’m not sure exactly but here is a rough list of what they could be trying to accomplish:

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11/ The pseudo anonymity of Bitcoin provides intelligence agencies with a paper trail, which can very often be decrypted by blockchain analysis companies. Bitcoin is not fungible (LN can help though).

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12/ The only way to minimize the chance of being tracked is to use a tumbler/mixer to obscure the trail. Or LN but it’s still very early.

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13/ Analyzing blockchain can provide actionable intelligence to government agencies, which could lead to criminal prosecution. This has happened before: thenextweb.com/eu/2017/02/21/…

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14/ Conclusion: The rapid rise in cumulative spending indicates that they the government is now paying more attention to Bitcoin than ever. Data link here: docs.google.com/spreadsheets/d…

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