OFAC Requests Chainalysis Subscription For Bitcoin Blockchain Surveillance

The U.S. Office of Foreign Assets Control wants a renewed subscription to Chainalysis blockchain surveillance tools for monitoring Bitcoin.

The Office of Foreign Assets Control (OFAC), a financial intelligence and enforcement agency within the U.S. Treasury Department, has requested a second subscription to license, training and support packages from blockchain analysis firm Chainalysis, according to a public contract notice.

“OFAC requires a commercial online blockchain tracing web-based application tool to equip investigators in its Office of Global Targeting (OGT) to analyze and track virtual currency transactions e.g. Bitcoin, in order to gather attribution information on involved parties that OGT may put on the [Specially Designated Nationals] List,” the notice reads. “This tool would specifically support cyber sanctions implementation undertaken by OFAC.”

OFAC made a similar request on May 4, 2021. The Specially Designated Nationals (SDN) List includes parties that are sanctioned from conducting financial transactions by the U.S. due to money laundering or terrorist financing concerns.

While Bitcoin can facilitate pseudonymous financial transactions, every transaction is recorded on a public and immutable digital ledger. This allows blockchain analysis firms such as Chainalysis to determine details about Bitcoin transactions, sometimes including the real-world identities behind them.

There are some privacy layers that Bitcoin users employ to better obscure these transactions, such as coin mixing and CoinJoin. But it appears this latest subscription request is specifically targeting coin mixing services like Wasabi Wallet.

“This license also includes Wasabi Demixing services at no additional cost to OFAC, and with no limits to the number of requests,” per the notice. “Chainalysis meets OFAC’s requirements by effectively providing the following capabilities: Address clustering; Transaction flow mapping and graphing; Wallet explorer; Analysis of user behavior, exchange rate, trade, and market data.”


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Darknet’s JokerStash Retiring After Making Over $1B Through Illicit Transactions

The founder of “Joker’s Stash,” one of the largest underground marketplaces for stolen payment card data, is officially retiring after making a fortune of over $1 billion, reports Elliptic, a U.K.-based blockchain analytics firm.

According to an Elliptic blog post, the site’s pseudonymous founder, JokerStash, said the site will cease operations on Feb. 15. Joker’s Stash was founded in 2014 and quickly rose to prominence.

“The revenues earned by Joker’s Stash can be estimated from the value of incoming cryptocurrency payments to its wallet, as seen on the blockchain,” wrote Elliptic co-founder Tom Robinson. “Since 2015 almost $400 million in bitcoin was sent to the marketplace, with annual sales peaking at $139 million in 2018. Sales dropped over the next two years, reflecting a broader downtrend in carding activity.”

Carding is the process of using stolen payment card data to purchase gift cards that can then be re-sold for cash. According to the cybersecurity firm Gemini Advisory, JokerStash claims to keep all proceeds of the marketplace in bitcoin. 

“If that is the case then the recent bitcoin price increase would have substantially inflated the value of [JokerStash’s] assets,” Robinson wrote. “If we assume an average total commission of 20% on sales, then considering bitcoin alone (the site also accepts Litecoin and Dash) they would have taken a total of at least 60,000 bitcoins – which today has a value of $2.5 billion.”

Elliptic noted that Joker’s Stash, which halted customer activity on Feb. 3, becomes “one of the few criminal marketplaces to shut down on its own terms, a victim of its own success rather than as a result of any apparent law enforcement operation.”



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Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling

Despite a 2020 that saw the price of bitcoin rise to all-time highs and set new records for stability, it isn’t too difficult to find Bitcoin FUD being spread. But recently released blockchain analysis demonstrates that the “bitcoin is for criminals” narrative is weaker than ever.

The FUD Keeps Coming

Yesterday, Janet Yellen, the incoming nominee for U.S. treasury secretary, highlighted a common narrative that many believe shines an unfair light on the original cryptocurrency, suggesting that the government will try and regulate its use.

“I think many [cryptocurrencies] are used — at least in a transaction sense — mainly for illicit financing,” Yellen said. “And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”

Last week, European Central Bank President Christine Lagarde said that bitcoin is a “highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”

Even some industry-focused publications have been spreading the “bitcoin is for criminals” FUD, without acknowledging the facts that criminals have been using fiat cash for much longer, that supposedly regulated financial institutions frequently facilitate major crimes, that anonymous cryptocurrencies would be much more useful for criminals than bitcoin or that there are many other arguments that suggest this narrative is unfair.

Cryptocurrency Is Leaving Criminals Behind

According to a summary of blockchain analysis firm Chainalysis’ “2021 Crypto Crime Report,” the proportion of cryptocurrency-related crime fell significantly last year.

“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers,” the firm found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $10.0 billion in transaction volume.”

See Also

Federal prosecutors have seized 69,730 ($1 billion worth) of bitcoin associated with darknet marketplace Silk Road. Here’s what we know so far.

To put it another way: Cryptocurrency transaction volume that Chainalysis could identify as “criminal” accounted for just 2.1 percent of all transactions in 2019 (though Yellen seems confident in saying that the technology is “mainly for illicit financing”), by far the highest proportion that Chainalysis has found since 2017. Across 2020, that figure was down to less than half of 1 percent, fueled in no small part by a sharp rise in overall economic activity.

Chainalysis did note that cryptocurrency-fueled ransomware activity grew 311 percent in 2020, compared to 2019, and that even this figure is probably low due to underreporting. But this still represented only 7 percent of the total funds received by criminal cryptocurrency addresses, which itself is a very small proportion of all cryptocurrency transactions across the year. Funds received through scams and darknet marketplaces were by far the leading categories for criminal transactions in 2020.

It may be unlikely that the picture painted by this report will significantly alter regulators’ opinions of Bitcoin, or eliminate the appeal of FUD-focused headlines and media coverage. But there is a clear story being told by Bitcoin’s 2020, even if it’s not the narrative everyone will adopt: BTC’s journey to global reserve currency status will always outpace its use on the fringes of the dark web.


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