Criminals using the supposedly untraceable, secure, and private coin may not be able to avoid the long arm of the law.

Ciphertrace, a crypto-intelligence company, announced Friday that it had filed two patents for the forensic investigation and tracing of the Monero (XMR) privacy coin. (Ciphertrace)

In August, Ciphertrace did reveal that it had developed tools for the U.S. Department of Homeland Security (DHS) to track transactions of the notoriously difficult-to-trace privacy coin.

Two new patents

Ciphertrace said in a statement that these tools had been under development since early 2019 as part of a Department of Homeland Security project.

The said project “laid the groundwork for future implementation of entity transaction clustering, wallet identification, exchange attribution, and other functionality” surrounding Monero.

The two patents filed by Ciphertrace are Techniques and Probabilistic Methods for Tracing Monero and Systems and Methods for Investigating Monero.

These patents cover features such as:

• Tools to explore Monero transaction flows
• Tracing methodologies
• Money-laundering controls
• Transaction visualization tools
• Tracking stolen or illicit Monero
• Participating in the Monero network to gain intelligence

Monero a favorite of criminals

Monero uses a variety of “obfuscation techniques” including its always-on, enforced privacy by default for all transactions.

According to Ciphertrace, these features attract criminals and as a result, 45% of darknet markets now support Monero—making it the second-favorite cryptocurrency of choice among criminals, just behind bitcoin.

The Monero privacy coin has therefore become highly interesting to law enforcement agencies. Secondly, though privacy advocates laud Monero, the flip side is that Virtual Asset Service Providers (VASPs) are extremely wary of Monero because its untraceable nature can open them up to anti-money-laundering investigations.

“More and more VASPs would rather delist than take on the extra compliance risks of anonymity-enhanced coins like Monero, explains Ciphertrace. “CipherTrace’s Monero tracing capabilities will allow VASPs to identify when inbound XMR may have criminal origins, allowing them to adequately risk rate customer transactions per any required regulations.”

The trend has already begun to take hold – ShapeShift earlier this month delisted privacy coins Zcash, Dash, and Monero.

Assisting law-enforcement

Ciphertrace is quick to point out that it does not reveal individual identities of crypto users, but does identify VASPs.

It also pinpoints criminal addresses and wallets associated with the theft of cryptocurrencies, fraud against consumers, ransomware, extortion, child exploitation, and other crimes.

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Image Credit: Monero Research Lab Logo