CipherTrace files two Monero (XMR) tracking patents
- Reportedly, these patent applications seek to help with the detection of criminal activity.
- CipherTrace claims it started the development of XMR tracing tools early last year.
- Privacy coins are continuously facing delisting as organizations strive to remain compliant.
CipherTrace, a blockchain analytics firm has filed two patent applications for tracing privacy-centric cryptocurrency Monero (XMR). The firm unveiled this news on November 20, noting that the patent applications are dubbed Techniques and Probabilistic Methods for Tracing Monero and Systems and Methods for Investigating Monero.
According to CipherTrace, these patents cover different aspects of peering into XMR’s transactions. These include forensic tools to explore XMR transactions, using Bayesian approaches and simulation techniques to create original tracing methods, Monero decoy reduction, and using probabilistic means to address risk-based XMR money-laundering controls. Additionally, the patents span leveraging statistical and probabilistic approaches to score transactions and to cluster likely owners, and using transaction visualization tools to track stolen XMR or illicit XMR. Apart from this, the patent applications cover the methodologies that CipherTrace will use to gain information about transactions that rely on third parties and the firm’s active participation in the Monero network to gain intelligence.
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CipherTrace went on to disclose that it has been working on the development of the above tools since early-2019 within the purview of a Department of Homeland Security project. Per the analytics firm, this project has built the foundation for the future implementation of entity transaction clustering, wallet identification, exchange attribution, and other functions that will help law enforcement agencies investigate XMR-related transactions and addresses that are involved in criminal activities.
Law enforcement agencies are increasingly getting interested in tracing XRM
According to CipherTrace, 45% of darknet markets are now supporting XMR. As a result, law enforcement agencies are increasingly becoming interested in tracing the privacy coin’s transaction to curb criminal activity. However, unlike other privacy-centric coins, XMR leverages privacy-by-default transactions to ensure its users are not accidentally or deliberately traced. As such, users remain safe, seeing as law enforcers cannot peer into their transactions.
Owing to the privacy-by-default feature, XRM has attracted both privacy advocates and criminals. Through the patents, CipherTrace seeks to facilitate the detection of criminals, improving the safety and sustainability of the coin in the future. At the moment, the coin’s privacy-enhanced nature is inhibiting its listing by Virtual Asset Service Providers (VASPs), according to CipherTrace. However, the company believes that its XRM tracing capabilities will help VASPs identify the origin of XMR, allowing them to rate the risk of customer transactions for compliance.
This news comes as privacy coins continue facing delisting. For instance, South Korea recently announced that it would ban all privacy-focused coins in the coming year. Apart from this, multiple exchanges, including OKEx, Upbit, and ShapeShift have delisted privacy coins to remain compliant.