Big Brother is watching: how government tracks your coins?

Government knows almost everything about activity of cryptocurrency users.

Cryptocurrency exchange Coinbase has been accused of attempting to sell user data to both the United States Drug Enforcement Administration and the Internal Revenue Service. At the same time, representatives of the company say that Coinbase analytics does not leak to law enforcement agencies, all data comes from publicly available information.

Perhaps there is some truth in this statement, but according to information from close sources, multiple government entities have been actively monitoring the activity of users of almost every centralized crypto exchange for over a year.

“I’ve worked for crypto exchanges, bitcoin ATM companies, general crypto services providers, and more. They all engage in surveillance practices. They have no choice.”

Suspicious Activity Report, or SAR, is a favorite U.S. government technique to track illicit activities. This practice is common in traditional finance, but it is implemented in a slightly different form in the crypto field.

“In traditional institutions, a transaction needs to meet certain criteria in most cases to be deemed suspicious. That’s not really true for Bitcoin and other cryptocurrencies though. As far as the government is concerned, the threshold of ‘suspicious’ is met as soon as cryptocurrency is involved.”

Insiders specify that crypto exchanges share information with FinCEN, the IRS, the FBI, various other federal law agencies. And sometimes the data comes even to foreign intelligence agencies.

“It’s the U.S., China, Japan, Russia, the UK, others I’m sure; it depends on where you’re based. But nearly every world power has legally mandated methods of reviewing centralized user data.”

If you’ve ever filled out AML information, there’s a good chance that data has been requested by someone. So even regular crypto users have been tracked at least one time in their life.

“Frozen accounts or funds. If you’ve had login issues that barred you from accessing your account. Anything like that likely means you have been subjected to a suspicious activity report without your knowledge. Or a government entity may have requested insight about you or your funds, in which case you may not be allowed to move forward until their review is complete.”

The only place to avoid mass surveilance — decentralized crypto exchanges. They employ privacy features to a decent degree. There are also numerous projects focused on this matter.

“Decentralized exchanges and privacy coins are the only answer that I am aware of. Use centralized services at your own peril.”

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Jeffrey Hancock

Blockchain enthusiast developer and writer. I love video games, blockchain and the hot symbiosis of these two worlds.