by Marco Dell'Aguzzo
Coinbase has sold a cryptocurrency tracking tool to ICE, the US government's agency for combating immigration and transnational crime. All the details
Coinbase, the largest cryptocurrency exchange platform in the United States, has sold to Immigration and Customs Enforcement (ICE) a series of features used to track and identify cryptocurrency users. This was revealed by the Intercept on the basis of the documents obtained.
CONTRACTS BETWEEN COINBASE AND THE ICE
In August 2021, Coinbase sold ICE the license of a data analysis software for $29,000; a month later, it sold software with an estimated value of $1.3 million to the agency. Jack Poulson, director of the Tech Inquiry technology observatory, has secured a new contract between Coinbase and ICE and shared it with the Intercept: the document shows that the federal authority now has access to the features of Coinbase Tracer, Coinbase's analytics and data collection tool.
WHAT IS COINBASE TRACER
Coinbase Tracer allows users, whether they are private individuals or government bodies, to track transactions made on the blockchain (it is the technology behind the sale of cryptocurrencies). Usually, in reality, the blockchain ledgers are public, but the enormous amount of data can make it very difficult – explains the Intercept – to follow the movements of the coin from sender to recipient without the aid of special software.
Coinbase also sells Tracer to law enforcement, claiming that the service allows it to "investigate illegal activities, including money laundering and terrorist financing" and to "link [cryptocurrency] addresses to entities in the real world."
Thanks to Coinbase Tracer, therefore, the ICE is able to track transactions made in various digital currencies such as Bitcoin, Ether and Tether; it can monitor their incoming and outgoing flows and can also counteract the methods used by some users to launder their funds or hide their transactions. According to the contract, the agency also has "historical geo-tracking data," but it's unclear what they consist of and where they come from.
WHAT DOES ICE DO WITH A CRYPTOCURRENCY TRACKING SYSTEM?
Contacted by the Intercept, a Coinbase spokeswoman said Tracer reports public information and does not use data from users of the platform. It did not answer questions about the specific use of the tool by the ECI.
The division of the ICE that bought the Coinbase tool is called Homeland Security Investigations: it deals not only with the fight against irregular immigration but with transnational crimes more generally, even those of a financial nature. An ICE spokesperson told the Intercept that, thanks to Tracer, the agency will be able to monitor more effectively both the trafficking of illegal opioids (such as fentanyl, responsible for tens of thousands of overdose deaths in the United States) on the dark web, and the gangs of cybercriminals who attack critical infrastructure and demand payment of a ransom in exchange for unlocking data (ransomware, in jargon).
"This tool," ICE said referring to Tracer, "does not reveal any sensitive personally identifiable information, is only used in criminal investigations, and is not used in the application of civil immigration law." However, he did not explain the concrete and specific ways of using the tool.
TEASING GOVERNMENT AGENCIES
In recent years, Coinbase has tried to present its data analysis systems as useful tools for the work of government agencies such as the DEA, the American anti-drug authority. For example, a few days ago, Coinbase's vice president of global intelligence, John Kothanek, stated that "if you're a cybercriminal and you use encryption, you're going to have a bad day [...]. We'll track you down and find those finances, and hopefully help the government seize that cryptocurrency."
Coinbase's wink to government authorities did not please all cryptocurrency fans. The Intercept gives two explanations: it has to do with the libertarian ideology of the crypto community, or the fact that these currencies are often used to facilitate illicit transactions or fraud.
WHAT HACKING TEAM HAS TO DO WITH IT
Coinbase Tracer, in truth, has been a controversial tool since its inception. In 2019, the specialized portal Motherboard made it known that Neutrino, a blockchain analysis company acquired by Coinbase to create the tracking service in question, had been founded by three former employees of Hacking Team, the Italian information technology company involved in the sale of espionage software also to authoritarian governments and not respectful of human rights (such as Saudi Arabia and Ethiopia, for example).