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Russian Financial Surveillance Wants To Screen Crypto Wallets

BBC reports that the Federal Financial Monitoring Service of Russia has commissioned a software package from several companies for the in-depth analysis of crypto wallets. The software should be operational by the end of this year at the latest. It should make it possible to discover the connections between individual suspects at the push of a button.

Primarily, it wants to expose offenses in the area of financial fraud and terrorism.BBC reports that the Federal Financial Monitoring Service of Russia has commissioned a software package from several companies for the in-depth analysis of crypto wallets. The software should be operational by the end of this year at the latest. It should make it possible to discover the connections between individual suspects at the push of a button. Primarily, it wants to expose offenses in the area of financial fraud and terrorism.

The Russian branch of the BBC recently reported on contracts from the Moscow tax authority Rosfinmonitoring, which was completed in April this year with various domestic software manufacturers. The call for tender was about the extraction and processing of information from Krypto Wallets. The orders have a total volume of 195.5 million rubles, which is the equivalent of around 2.30 million euros. The Authority and the Moscow Institute for Security and Information Analysis have not responded to press inquiries from the BBC. A disclosure of any details has been rejected because of the secrecy.

Rosfinmonitoring Main Goal Is Optimizing

Already in 2014, Rosfinmonitoring criticized the theoretical possibility to carry out illegal transactions with the help of cryptocurrencies. The transactions from Wallet to Wallet should in future be fully transparent. Herman Klimenko, a former adviser to President Putin, told the BBC that it was justified to monitor cryptocurrencies more effectively. Because of the difficult findability, offenders often use cryptocurrencies in Darknet. According to Klimenko, this mainly affects the acquisition of weapons, drugs or videos containing illegal content.

Critics such as Anton Merkurov complain that the surveillance of Blockchain and Bitcoin only lead to criminals switching to cryptocurrencies that can no longer be traced. The agency’s plans would only result in the perpetrators using other coins instead of being exposed. In addition, the share of traded assets that is actually used for the purpose of money laundering, vanishingly small.

The Digital Arms Race Has Already Begun

The extremely transparent architecture of the Bitcoin’s blockchain opens the door to state surveillance. At least the theory. However, it will be problematic in practice, as soon as exchange markets such as XMR.TO are used, which do not even query the data of their users. Shapeshift.io also works beyond the Know Your Customer (KYC) principle. This led to cybercriminals swapping WannaCry ransoms for a short time through this service provider to cover their tracks. While Shapeshift.io absolutely wants to query the real IP address of its users, XMR.to set up its own onion address for the Tor network in the spring of 2017.

Under these circumstances, even using the new software, it would be impossible for the Russian authorities to convict anyone. This in turn will sooner or later lead to new tenders and even more expensive orders. The digital arms race has long since begun, the winners are likely to be the developers of the expensive surveillance software.