The Pentagon Is Making Efforts To Assess The Threat Of Cryptocurrency To National Security

The Pentagon Is Making Efforts To Assess The Threat Of Cryptocurrency To National Security

The Army’s Office of Innovation is launching a comprehensive cryptocurrency review to assess the threats to national security and law enforcement from the rise of digital assets.

The Defense Advanced Research Projects Agency – better known as DARPA, the office that developed the oldest technology supporting the Internet – has hired crypto-intelligence firm Inca Digital to run the project for a year. The company will develop tools that give the Pentagon an accurate view of the inner workings of cryptocurrency markets, in part to help authorities crack down on illicit uses of digital assets.

“The ongoing program here involves mapping the crypto universe in some detail,” Acting Program Director Mark Flood said in an interview with The Washington Post. In addition to combating illicit financing, the office aims to use data to gain insights into the formation dynamics of traditional financial markets, where detailed information is difficult to collect.

The deal is the latest evidence that federal agencies are stepping up efforts to thwart rogue regimes, terrorists and other criminal actors that use cryptocurrency to fund their operations.

Last month, the Treasury Department issued its first-ever sanctions against a code targeting Tornado Cash, a service that helped North Korean hackers and others launder stolen cryptocurrency. This week, the administration issued a request for public input on the national security of cryptocurrencies and the risks of illicit financing. Separately, the Department of Justice announced this month that it has launched a nationwide network of 150 prosecutors to coordinate crypto-related investigations and prosecutions.

Flood noted that North Korean government hackers carried out digital thefts and raked in billions of dollars for the regime’s weapons program. The Ukrainian government reported Russian attacks on its financial industry ahead of the invasion this spring.

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“We just need to acknowledge that the financial sector may be a component of modern warfare in the future, and anything we can do to strengthen and protect the US financial sector and the financial sectors of our allies is beneficial,” said Flood, a former Treasury official. who researched systemic financial risk.

However, governments have struggled to monitor cryptocurrency. The industry’s lack of regulatory barriers allowed it to grow into a shadow financial system that seasoned criminals found ample opportunities to exploit.

Inca Digital CEO Adam Zarazinsky said his company’s work for DARPA would be “fairly extensive.” Among other goals, the project aims to help the government understand how money flows in and out of blockchain systems, or public ledgers that are maintained on a distributed network of computers. It is also supposed to Distinguish between real cryptocurrency trading and bot-driven activity and detect cryptocurrency-based scams.

“There is a lot of concern about cryptocurrency scams at the moment,” said Zarazinsky, an Air Force veteran who also worked on criminal intelligence for Interpol. He said the organizers of the schemes are often “well-organised transnational criminal networks, often either explicitly supported by hostile states or given tacit consent to carry out these operations, and billions of dollars are stolen from Americans and Europeans.”

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The project is not DARPA’s first foray into blockchain technology. Agency issued a Report In June, commissioned by cybersecurity firm Trail of Bits that found blockchains often contain vulnerabilities that undermine their security claims. But Flood said the agency’s goal with its latest project is not to track individual crypto users. “DARPA is not involved in surveillance,” he said. “I will stress that we are careful in this research not to share personally identifiable information with us.”

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