The US allegedly has tools to track Bitcoin transactions

The IRS has claimed that it is already countering crypto terrorist financing activities with tools that can trace blockchain transactions back to the source

John Demers, the Assistant Attorney General of the US Department of Justice, has revealed that the government, in particular the IRS, has already developed the tools necessary to track blockchain transactions and trace them back to their source.

This coincides with an announcement from the US that reveals it has seized over $2 million in Bitcoin and other cryptocurrencies allegedly meant for financing terrorist organisations over social media.

Authorities revealed they had secured court orders to proceed with searching over 300 wallets suspected to have connections to the case, which was where the $2 million originated.

A report by the New York Times explains that multiple Facebook pages and a website that had connections to the terrorist organisations were also seized by the authorities. These pages and sites had been used to gather funds that would directly go into supporting terrorist organisations, such as Al Qaeda, Hamas and ISIS, according to Demers.

Other individuals, who had not been so quick to conceal their identity nor their intent, had openly solicited these groups on social media in the belief that the anonymity of blockchain was enough to keep them hidden.

Demers also pointed out that this collaboration effort between multiple agencies signified the first significant civil forfeiture actions to seize cryptocurrency in line with investigations on counterterrorism financing.

The Assistant Attorney General spoke on a call with reporters and explained that the terrorists were successful in terrorist financing because they seized the opportunity to raise cryptocurrency on social media.

Apart from identifying 300 wallet addresses as being connected to terrorist financing, the US Government also blacklisted the owners to ensure they would not be able to cash out their cryptocurrencies through an exchange and send funds to their financial institutions.

Many are waiting to see if the US Government’s new tracking capabilities will also be used to find cryptocurrency traders and investors that have been misreporting their tax withholdings. The IRS is already in the process of contracting blockchain analysis firms, such as Coinbase and Chainalysis, to help with handling the tools.

This year, the IRS also added another question on US tax returns. Their newest query asks individuals if they hold virtual currencies, such as Bitcoin, or other cryptocurrencies. Those who respond yes may have their transactions on the blockchain monitored.

The penalty for crypto holders that refuse to corporate could face higher penalties for withholding this information with this latest development.