The military's innovation branch is carefully examining cryptocurrencies in order to assess the threats that the emergence of digital assets pose to law enforcement and the nation's security.
The year-long trial will be run by the crypto intelligence business Inca Digital under contract from the Defense Advanced Research Projects Agency, or DARPA, which created the original technology that powers the internet.
The business will develop tools that will provide the Pentagon a thorough understanding of the inner workings of the cryptocurrency markets, in part to help law enforcement fight the unauthorized usage of digital assets.
According to Mark Flood, a program manager at the CIA, "the endeavor going here is mapping out the cryptocurrency ecosystem in some depth."
The government wants to use the data to learn more about the dynamics affecting traditional financial markets, where precise information is more difficult to come by, in addition to fighting illicit funding.
The deal is the most recent evidence that federal authorities are boosting up their efforts to counter rogue governments, terrorists, and other criminal actors who utilize cryptocurrency to fund their operations.
Last month, the Treasury Department targeted Tornado Cash, a company that helped North Korean hackers and others to launder stolen money, with its first-ever software code sanctions.
This week, the organization made a public call for feedback on the risks that cryptocurrencies pose to both national security and criminal finance. A national network of 150 prosecutors will be established, the Justice Department stated earlier this month, to coordinate investigations and prosecutions involving cryptocurrencies.
According to Flood, hackers connected to the North Korean government have conducted cyberheists worth billions of dollars to fund the regime's development of weapons. Additionally, the Ukrainian government discovered Russian strikes on its financial sector well before the invasion this spring.
The history of cryptocurrencies, from Bitcoin to Stablecoin, is a house of cards.
Anything we can do to strengthen and protect the US financial sector and the financial sectors of our allies is beneficial, according to Flood, a former Treasury official who has studied systemic financial risk. "We simply need to acknowledge that the financial sector may become a component of modern warfare in the future," Flood said.
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Governments have nevertheless had a difficult time regulating cryptocurrencies. The industry has developed into a shadow financial system as a result of a lack of regulatory control, which sophisticated criminals have found many opportunities to exploit.
According to Inca Digital CEO Adam Zarazinski, the company will work on "quite diversified" projects for DARPA. The project aims to help the government understand how money enters and exits blockchain systems, which are open ledgers maintained on a distributed network of computers, among other things.
It is also intended to distinguish between legitimate bitcoin transaction and activity driven by bots and to spot cryptocurrency-based scams.
According to Zarazinski, a former Air Force officer who had worked in criminal intelligence for Interpol, "there's a lot of fear about crypto scams right now." He claims that the perpetrators of the plot are frequently "well-organized, worldwide criminal networks, either explicitly supported by opposing countries or given tacit authority to carry out these operations, and billions of euros are seized from Americans and Europeans."
The discredited father of cryptocurrencies insists that he is not hiding. But nobody is aware of his whereabouts.
DARPA has previously experimented with blockchain technology. A government-commissioned study on cybersecurity firm Trail of Bits' findings that blockchains frequently have weaknesses that undermine their security promises was published in June.
Flood clarified that the agency's present operations are not meant to monitor any particular bitcoin users. He said, "DARPA does not undertake surveillance." I want to emphasize that we take great care not to include personally identifying information in our study.
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