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IRS To Track Nefarious Privacy Coin And Lightning Transactions

The United States’ Internal Revenue Service (IRS) is set to track information and tools to help it trace transactions using privacy coins, layer two protocols such as Lightning Network and side chains like Plasma and OmiseGo (OMG), according to a CoinTelegraph report. 

A request has been launched on June 30 for information published by the U.S. Department Of The Treasury which reveals the IRS’ Criminal Investigation Division is seeking submissions for “an interactive prototype” with a graphic user interface for analyzing distributed ledger-based transactions involving privacy coins and other privacy-enhancing blockchain technologies.

Document such as Monero (XMR), Zcash (ZEC), Dash (DASH), Grin (GRIN), Komodo (KMD), Verge (XVG), and Horizon (ZEN) are among the privacy coins that the IRS hopes to target, in addition to the layer-two solutions Raiden Network, Celer Network, and Lightning.

Furthermore, the IRS requested that prototypes detail systems for “clustering transactions” from a single user who is using “privacy coins and obfuscation technologies”; compile a library of wallet addresses associated with “suspected or known to be involved in nefarious activities”; and identify other addresses associated with said nefarious wallets.

The agency also requests that the system include “a mechanism for sharing investigative research between investigators”, secure data export and import functionality, and estimates on proposed systems’ cost and return on investment.

“Currently, there are few investigative resources for tracing transactions involving privacy cryptocurrency coins, layer-two network protocol transactions, side-chain ledger transactions, or transactions on distributed ledgers that are adopting signature algorithms that provide privacy to illicit actors.”

The deadline for prototype submissions is July 14.

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