Investigating Bitcoin Crime: The Battle Against Illicit Use of the Digital Currency | Elliptical

In an interview for defense contracts of the Ministry of Defense, dr. James Smith explained how regulators and law enforcement are working with the industry to tackle criminals using bitcoin and digital currency to conduct illegal activity.

He explained pseudonymity – that with bitcoin you use pseudonyms, but in reality every transaction is recorded publicly. James says: “So what you can do is run a lot of fraud to build a bigger picture of these transactions. By looking at patterns and repeating processes we build a partial picture of what’s going on and who the main players are. Then we can start to track individual payouts or look for individual patterns of activity.”

Law enforcement tools to track Bitcoin crimes

Elliptic provides law enforcement agencies with forensic capabilities, helping them follow money or trace payments when investigating an active case. James says feedback on this pioneering technology has been positive. “It’s still early in the process, but we’re getting really good engagement from a lot of top agencies that are seeing an increase in the number of cases involving Bitcoin and needing new tools to be able to deal with them. It’s certainly giving them new information that wasn’t available before.”

James points out that this work was initially a business LED. Elliptic started with money laundering software for financial institutions, and the company was then approached by law enforcement agencies who asked them to build a product to meet their needs. He believes this means Bitcoin has a future – if it’s accepted by regulators and law enforcement and appropriately, businesses will realize it’s a powerful tool.

He believes that the future may include different types of digital currencies, indicating that several central banks, including the Bank of England, are now looking at issuing currency on top of similar technology in the future. He concludes: “I think we’re going to see more currencies using this kind of technology. From our point of view, that’s great because the more activity that uses this technology, the more demand there is for the kind of analytics that we’re doing.”