A contract agreement obtained by Jack Poulson, director of the watchdog group Tech Inquiry, shows that the cryptocurrency exchange Coinbase is providing geo-tracking data to US government agencies without any restrictions placed on it.
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According to contract documents provided to The Intercept, Coinbase, the largest cryptocurrency exchange in the United States, is providing Immigrations and Customs Enforcement a set of features used to track and identify bitcoin users.
For $29,000, Coinbase sold a single analytics license to ICE in August 2021. The following month, the government may have spent $1.36 million on software, although it was not clear what capabilities would be provided to the controversial Homeland Security Investigations division of the agency. ICE now has access to a number of forensic features offered through Coinbase Tracer, the company’s intelligence-gathering tool, according to a new contract agreement (pdf below) obtained by Jack Poulson, director of the watchdog group Tech Inquiry, and shared with The Intercept (formerly known as Coinbase Analytics).
The blockchain is a distributed ledger of transactions that is essential to the use of cryptocurrencies, and Coinbase Tracer enables users in the government and private sectors to track transactions through it. Even while blockchain ledgers are normally open to the public, the vast amount of data they contain can make it nearly impossible without the use of software tools to trace the money from spender to beneficiary. With the claims that Tracer may “investigate illicit activities including money laundering and terrorist financing” and “connect [cryptocurrency] addresses to real world entities,” Coinbase promotes it for use in both corporate compliance and law enforcement investigations.
The document, which was made available through a FOIA request, claims that ICE is now able to monitor transactions performed using almost a dozen different digital currencies, including Bitcoin, Ether, and Tether. Aiming to counter techniques some cryptocurrency users try to launder their money or disguise their transactions, analytical tools include “Multi-hop link Analysis for incoming and outgoing funds,” “Transaction demixing,” and “shielded Transaction Analysis.” Provocatively, the contract also offers “Historical geo tracking data,” albeit it’s not obvious what exactly this data entails or where it came from. According to an email made available as a result of the FOIA request, Coinbase did not demand that ICE accept an End User License Agreement, a piece of standard legalese that places restrictions on what a client can do with software.
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Natasha LaBranche, a Coinbase spokesperson, pointed The Intercept to a disclaimer on the company’s website that read, “Coinbase Tracer sources its information from public sources and does not use Coinbase user data.” when asked about the ICE contract and the data involved. LaBranche declined to comment on the usage of Coinbase Tracer by ICE or whether any restrictions were placed on it.
The IRS, Secret Service, and Drug Enforcement Administration are just a few of the government agencies to whom Coinbase has recently made a concerted attempt to promote its intelligence features. Coinbase’s vice president of global intelligence, John Kothanek, stated in testimony earlier this month that his company was eager to support Homeland Security. “If you are a cyber criminal and you’re using crypto, you’re going to have a bad day. … We are going to track you down and we’re going to find that finance and we are going to hopefully help the government seize that crypto.” Many cryptocurrency enthusiasts have found Coinbase’s government work to be quite controversial, possibly as a result of both the long-standing libertarian attitude in that community and the reality that digital currencies are so regularly exploited to facilitate various types of fraud.
Even the creation of the Coinbase Tracer tool was plagued by controversy. According to a 2019 Motherboard report, the company that created Coinbase Tracer, Neutrino, a blockchain-analysis company, was a “was founded by three former employees of Hacking Team, a controversial Italian surveillance vendor that was caught several times selling spyware to governments with dubious human rights records, such as Ethiopia, Saudi Arabia, and Sudan.” Following a backlash from the public, Coinbase declared that these employees would “transition out” of the company.
In addition to assisting with migrant raids and deportation operations, Homeland Security Investigations, the ICE division that bought the Coinbase tool, is entrusted with larger transnational crimes, including many types of financial offenses. It’s not yet clear how ICE will use Coinbase. A comment from the agency was not immediately available.
Read the agreement given below: