IRS Seeks New Ways to Monitor Activity within Crypto Wallets

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The Digital Forensics team of the Internal Revenue Service (IRS) is on a hunt for the tools for cracking crypto wallets to “tame the cybersecurity research into measured, repeatable, consistent digital forensics processes.”

As more of the United States’s populace get enlightened about cryptocurrency and delve into trading and making purchases with crypto assets, the IRS has been spurred into action as they are seeking ways to keep track of activities within crypto wallets. Trying to keep up, the IRS has put out an official statement requesting for knowledge about penetrating cryptocurrency wallets.

A large majority of crypto traders use their wallets as storage for their digital assets, but they make efforts to secure their assets using private keys and two-factor authentication (2FA).

It’s undebatable that some people use the blockchain to hide criminal activities. Cryptocurrency wallets represent a blind spot for the IRS Criminal Investigation Division, making it extremely difficult to review financial records of some individuals for potential violations of the US Internal Revenue Code. 

In a news report on April 13th, Charles Rettig, IRS Commissioner, declared in the audience of the Senate Finance Committee that the nation fails to collect taxes amounting to virtually $1 trillion annually as a result of the increase in popularity of cryptocurrency. These digital currencies pose a challenge to monitoring finance and taxing accordingly.

In a latest request for information, the IRS and Treasury Department stated that, “Though a few known cyber penetration testers have published vulnerabilities on specific devices, the process of decrypting the hardware devices to gain access to the wallets has been challenging. The explicit outcome of this requirement is to tame the cybersecurity research into measured, repeatable, consistent digital forensics processes that can be trained and followed in a digital forensics laboratory.”

The IRS also said they need specialized equipment and techniques that would be useful for cracking the crypto wallets (both software and hardware prototypes). Specifically, they would need to be able to decipher software, reverse-engineer hardware, incorporate circuit packages and deconstruct printed circuit boards.

The formulated contract is targeted to attain certain objectives. Some of the aims and objectives of the proposed contract are to delve into cybersecurity research, to explore crypto wallets, find different ways of gaining access to these wallets, recognize functional cryptographic prototypes to explore, detail out the processes, hardware, and technical skills required to replicate in an avant-garde digital forensics laboratory.

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