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Russian Watchdog is Developing a Cryptocurrency Tracking Tool

Last Updated March 4, 2021 3:36 PM
Yashu Gola
Last Updated March 4, 2021 3:36 PM

The Federal Financial Monitor Service, or Rosfinmonitoring, has reached a limited liability company to develop an analytical tool for tracking cryptocurrency transactions, BBC Russia reported .

The Russian watchdog requires the addition of a crypto-tracking tool to an anti-financial crime system. The method as a whole would allow the money police to arrange suspicious financial activities into a thread of investigable data. Cryptocurrencies like Bitcoin that governments perceive as safe and anonymous tools to fuel financial crimes would become the subject of continuous auditing, per Moscow’s indication to curb crypto-related crimes.

The crypto-tracking tool expects to receive and process information on Bitcoin wallets and transactions. The crypto information would become a part of a full-fledged report on suspects, which would also include their names, bank accounts, credit or debit cards details, as well as their mainstream transactional records.

Rosfinmonitoring has granted a 195 Million Ruble contract to the Moscow Institute for Security and Information Analysis (SPI) to develop the system described above by the end of 2018. The regulator has a history of condemning Bitcoin and similar cryptocurrencies, the prime example being its effort to make digital transactions illegal in 2014.

However, Russia’s stance on Bitcoin fairly softened after the US imposed economic sanctions on them. Moscow is now in the process of finalizing the regulations on cryptocurrencies and ICO, which would likely allow cryptocurrencies to be used as payment “in controlled quantities.”

The proposed bill also fears that cryptocurrencies could be used for gray schemes in darknet, for paying bribes and black salaries. It could be a valid reason why Rosfinmonitoring is keen to have a crypto-analytics feature integrated into its finance monitoring system.

But would a Bitcoin-tracing tool make sense?

Bitcoin’s architecture allows one to find transactional links between two wallet addresses through Merkle tree mechanism. One can see an entire chain of transactions from point A to point Z through rich visuals. The law enforcement can identify the culprits by deanonymizing the wallet address of one of the suspects. The Danish police, which claims to have a ground-breaking crypto-tracking system under their belts, had arrested a local drug trafficker by identifying the persons behind their Bitcoin wallets.

While it is evident that Rosfinmonitoring is attempting something similar, experts believe it will not result in anything “ground-breaking.”

Andreas Antonopolous, a renowned Bitcoin evangelist, says:

“The question is not whether Bitcoin should be regulated, but whether it *can* be regulated. The reality is “No.” The rest is nostalgia.”

Satoshi.fm’s Editor-in-Chief, Anton Merkurov, believes finding illegal crypto transactions are like “trying to find a microbe under a microscope in a drop of water.”

“If you look at the entire volume of laundered funds, the share that is laundered through the cryptocurrency is tiny,” Merkurov told BBC. “This should not be a priority.”

On the whole, a measure has been taken which can be helpful to some extent in catching individual sites, servers and people involved with nefarious activities, but could prove shortsighted for a global peer-to-peer network.

Featured image from Shutterstock.