IRS to Launch Cryptocurrency Tracing Pilot

The IRS is looking for private sector help in launching a Cryptocurrency Tracing pilot program for tracing and attribution of privacy coins and Layer 2 off-chain transactions, with the aim of assisting the agency’s cyber-crime mission relating to cryptocurrency privacy technologies.

The contractor for the pilot program will provide weekly status reports on progress including major accomplishments, upcoming tasks, and issues or concerns. Additionally, all documentation, data, source code, and software developed will be provided to IRS, Criminal Investigation (IRS-CI).

The three primary goals of the solution, according to the request for proposal (RFP), include:

  1. “Provide information and technical capabilities for CI Special Agents to trace transaction inputs

and outputs to a specific user and differentiate them from mixins/multisig actors for Monero and/or Lightning Layer 2 cryptocurrency transactions with minimal involvement of external vendors”;

  1. Provide technology to allow Special Agents to predict statistical likelihoods of transaction inputs, outputs, metadata, and public identifiers with external vendors providing minimal involvement; and
  2. Provide algorithms and source code that allows CI’s to develop, modify, and integrate the pilot capabilities with internal code and systems with minimal costs, licensing issues, or dependency on external vendor.

“This type of approach is more often used in research and development environments, but there are existing regulations that allow federal agencies to buy commercial items in a manner similar with how the private sector would,” the RFP states. “Pilot IRS will aggressively pursue a streamlined and cost-effective approach to testing and deploying technology solutions that will have an immediate impact on the government’s mission.”

Jordan Smith
About Jordan Smith
Jordan Smith is a MeriTalk Staff Reporter covering the intersection of government and technology.

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