Blockchain analysis

<h2 id="cryptocurrency-exchanges">Cryptocurrency exchanges</h2>
<a href="/facts/Cryptocurrency_exchange/PBbzsc11">Cryptocurrency exchanges</a> are often required by law to address the source of funds for crypto traders. For example, <a href="/facts/Singapore/CQDkhUvD">Singapore</a>, <a href="/facts/Japan/U5mz0SRT">Japan</a>, and the <a href="/facts/United_States/P0sCdLe5">United States</a> have all passed laws that require exchanges to track the source of the crypto funds.<a class="footnote-ref" id="fnref:4" href="#fn:4">4</a><a class="footnote-ref" id="fnref:5" href="#fn:5">5</a> In the United States, the <a href="/facts/Bank_Secrecy_Act/Amdsden8">Bank Secrecy Act</a> requires cryptocurrency businesses to implement <a href="/facts/Know-your-customer/jeV49PB9">know-your-customer</a> and <a href="/facts/Anti-money_laundering/98Gw3mgx">anti-money laundering</a> programs, including registering with <a href="/facts/Financial_Crimes_Enforcement_Network/C5q21sov">FinCEN</a> as a money service business.<a class="footnote-ref" id="fnref:6" href="#fn:6">6</a>
Blockchain analysis enables law enforcement to trace cryptocurrencies back to individuals wallets on exchanges, which can then be subpoenaed for information on criminal actors.

<h2 id="method">Method</h2>
Because blockchains are typically public, anyone can view the contents of transactions by querying a node or block explorer site (such as Etherscan.io or BitRef.com). By using common-spend clustering algorithms, it is possible to map the transactions of certain entities on the <a href="/facts/Blockchain/8H43GgWy">blockchain</a>.<a class="footnote-ref" id="fnref:7" href="#fn:7">7</a> This is how criminals are being caught moving illicit funds using various cryptocurrencies.<a class="footnote-ref" id="fnref:8" href="#fn:8">8</a>

<h2 id="law-enforcement-and-blockchain-surveillance">Law enforcement and blockchain surveillance</h2>
Blockchain analysis has helped produce evidence in several high interest cases.<a class="footnote-ref" id="fnref:9" href="#fn:9">9</a> In 2018, an analysis of <a href="/facts/Bitcoin/UJvqfray">bitcoin</a> transactions uncovered a link between major cryptocurrency exchange <a href="/facts/BTC-e/dRHDHT8l">BTC-e</a> and <a href="/facts/Fancy_Bear/DmtYNLGu">Fancy Bear</a>.<a class="footnote-ref" id="fnref:10" href="#fn:10">10</a> In 2019, a major website hosting child sexual abuse material was taken down by law enforcement using blockchain analysis techniques.<a class="footnote-ref" id="fnref:11" href="#fn:11">11</a> 
In 2021, the <a href="/facts/United_States_Department_of_Justice/2SuTuevo">US Department of Justice</a> used blockchain analysis to recover most of the ransom from the <a href="/facts/Colonial_Pipeline_ransomware_attack/wj5HHBDc">Colonial Pipeline ransomware attack</a>.<a class="footnote-ref" id="fnref:12" href="#fn:12">12</a><a class="footnote-ref" id="fnref:13" href="#fn:13">13</a> In 2022, <a href="/facts/IRS_Criminal_Investigation/od7GjJSn">IRS Criminal Investigations</a> used blockchain analysis to seize over 50,000 bitcoin stolen from the <a href="/facts/Silk_Road_(marketplace)/YQD4n5aT">Silk Road</a> <a href="/facts/Darknet_market/pj6xHFVr">dark web marketplace</a>.<a class="footnote-ref" id="fnref:14" href="#fn:14">14</a><a class="footnote-ref" id="fnref:15" href="#fn:15">15</a>

<h2 id="references">References</h2>

<ol>
<li id="fn:1">Meiklejohn, Sarah; Pomarole, Marjori; Jordan, Grant; Levchenko, Kirill; McCoy, Damon; Voelker, Geoffrey M.; Savage, Stefan (23 October 2013). "A fistful of bitcoins". Proceedings of the 2013 conference on Internet measurement conference. Imc '13. pp. 127–140. doi:10.1145/2504730.2504747. ISBN 9781450319539. S2CID 2224198. <a href="9781450319539" target="_blank">9781450319539</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></li>
<li id="fn:2">Sarah, Kappos, George Yousaf, Haaroon Maller, Mary Meiklejohn (2018-05-08). An Empirical Analysis of Anonymity in Zcash. OCLC 1106297947.{{cite book}}: CS1 maint: multiple names: authors list (link) <a href="http://worldcat.org/oclc/1106297947" target="_blank">http://worldcat.org/oclc/1106297947</a> <a href="#fnref:2" class="footnote-back-ref">↩</a></li>
<li id="fn:3">Greenberg, Andy (2022). Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency. Doubleday. ISBN 978-0593663677. <a href="978-0593663677" target="_blank">978-0593663677</a> <a href="#fnref:3" class="footnote-back-ref">↩</a></li>
<li id="fn:4">Team, Chainalysis (2021-10-26). "Cryptocurrency Regulation: How Governments Around the World Regulate Crypto". Chainalysis. Retrieved 2023-01-05. <a href="https://blog.chainalysis.com/reports/cryptocurrency-regulation-explained/" target="_blank">https://blog.chainalysis.com/reports/cryptocurrency-regulation-explained/</a> <a href="#fnref:4" class="footnote-back-ref">↩</a></li>
<li id="fn:5">PricewaterhouseCoopers. "Carving up crypto: Regulators begin to find their footing". PwC. Retrieved 2019-05-28. <a href="https://www.pwc.com/us/en/industries/financial-services/regulatory-services/library/cryptocurrency.html" target="_blank">https://www.pwc.com/us/en/industries/financial-services/regulatory-services/library/cryptocurrency.html</a> <a href="#fnref:5" class="footnote-back-ref">↩</a></li>
<li id="fn:6">"Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies | FinCEN.gov". www.fincen.gov. Retrieved 2023-01-05. <a href="https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-persons-administering" target="_blank">https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-persons-administering</a> <a href="#fnref:6" class="footnote-back-ref">↩</a></li>
<li id="fn:7">Spagnuolo, Michele; Maggi, Federico; Zanero, Stefano (2014). "BitIodine: Extracting Intelligence from the Bitcoin Network". Financial Cryptography and Data Security. Lecture Notes in Computer Science. 8437: 457–468. doi:10.1007/978-3-662-45472-5_29. hdl:11311/881385. ISBN 978-3-662-45471-8. S2CID 4643437. <a href="978-3-662-45471-8" target="_blank">978-3-662-45471-8</a> <a href="#fnref:7" class="footnote-back-ref">↩</a></li>
<li id="fn:8">Yakowicz, Will (2018-01-09). "Startups Helping the FBI Catch Bitcoin Criminals". Inc.com. Retrieved 2019-05-29. <a href="https://www.inc.com/will-yakowicz/startups-law-enforcement-agencies-catch-criminals-who-use-cryptocurrency.html" target="_blank">https://www.inc.com/will-yakowicz/startups-law-enforcement-agencies-catch-criminals-who-use-cryptocurrency.html</a> <a href="#fnref:8" class="footnote-back-ref">↩</a></li>
<li id="fn:9">Alden Pelker, C.; B. Brown, Christopher; M. Tucker, Richard (2021). "Using Blockchain Analysis from Investigation to Trial". Department of Justice Journal of Federal Law and Practice. 69 (3): 59–100. <a href="https://www.justice.gov/usao/page/file/1403671/download" target="_blank">https://www.justice.gov/usao/page/file/1403671/download</a> <a href="#fnref:9" class="footnote-back-ref">↩</a></li>
<li id="fn:10">"Bitcoin Suspect Could Shed Light on Russian Mueller Targets". Bloomberg.com. 4 September 2018. <a href="https://www.bloomberg.com/news/articles/2018-09-04/bitcoin-suspect-could-shed-light-on-russians-targeted-by-mueller" target="_blank">https://www.bloomberg.com/news/articles/2018-09-04/bitcoin-suspect-could-shed-light-on-russians-targeted-by-mueller</a> <a href="#fnref:10" class="footnote-back-ref">↩</a></li>
<li id="fn:11">Newman, Lily Hay. "How a Bitcoin Trail Led to a Massive Dark Web Child-Porn Site Takedown". Wired. <a href="https://www.wired.com/story/dark-web-welcome-to-video-takedown-bitcoin/" target="_blank">https://www.wired.com/story/dark-web-welcome-to-video-takedown-bitcoin/</a> <a href="#fnref:11" class="footnote-back-ref">↩</a></li>
<li id="fn:12">Bing, Christopher; Menn, Joseph; Lynch, Sarah N.; Bing, Christopher (2021-06-08). "U.S. seizes $2.3 mln in bitcoin paid to Colonial Pipeline hackers". Reuters. Retrieved 2023-01-05. <a href="https://www.reuters.com/business/energy/us-announce-recovery-millions-colonial-pipeline-ransomware-attack-2021-06-07/" target="_blank">https://www.reuters.com/business/energy/us-announce-recovery-millions-colonial-pipeline-ransomware-attack-2021-06-07/</a> <a href="#fnref:12" class="footnote-back-ref">↩</a></li>
<li id="fn:13">Team, Chainalysis (2022-02-10). "Chainalysis In Action: How FBI Investigators Traced DarkSide's Funds Following the Colonial Pipeline Ransomware Attack". Chainalysis. Retrieved 2023-01-05. <a href="https://blog.chainalysis.com/reports/darkside-colonial-pipeline-ransomware-seizure-case-study/" target="_blank">https://blog.chainalysis.com/reports/darkside-colonial-pipeline-ransomware-seizure-case-study/</a> <a href="#fnref:13" class="footnote-back-ref">↩</a></li>
<li id="fn:14">Greenberg, Andy. "IRS Seizes Another Silk Road Hacker's $3.36 Billion Bitcoin Stash". Wired. ISSN 1059-1028. Retrieved 2023-01-05. <a href="https://www.wired.com/story/silk-road-bitcoin-seizure-james-zhong/" target="_blank">https://www.wired.com/story/silk-road-bitcoin-seizure-james-zhong/</a> <a href="#fnref:14" class="footnote-back-ref">↩</a></li>
<li id="fn:15">"U.S. Attorney Announces Historic $3.36 Billion Cryptocurrency Seizure And Conviction In Connection With Silk Road Dark Web Fraud". www.justice.gov. 2022-11-07. Retrieved 2023-01-05. <a href="https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction" target="_blank">https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction</a> <a href="#fnref:15" class="footnote-back-ref">↩</a></li>
</ol>

Blockchain analysis open-in-new

Blockchain analysis