FBI Director Christopher Wray declined to swing at a gentle pitch over the plate for more regulation of cryptocurrency anonymity at a recent Senate Homeland Security hearing.
Immediately after explaining that he does not “pretend to know how cryptocurrency works,” Sen. Mitt Romney (R-Utah) said, “I would think it’s more difficult to carry out your work when we can’t follow the money because the money is hidden from us.”
Calling out “the challenges [cryptocurrency] presents for law enforcement and the deterrence of terrorism,” Romney asked, “Am I wrong in thinking this is an area we ought to take a look at, or is cryptocurrency just not a big deal as it relates to your respective responsibilities?”
While Wray agreed that tracing cryptocurrency is already a “significant” issue and becoming a bigger one for the FBI, he demurred on calling for legislative action.
“Whether or not that is the appropriate subject of some sort of regulation [Wray’s emphasis] as the response, is harder for me to speak to,” he said. “We are looking at it from an investigative perspective, including tools that we have to follow the money even in this new world that we’re living in.”
Those tools seem to be working pretty well, as demonstrated by the October 15 announcement that several federal agencies had used Bitcoin tracking tools to break up one of the world’s largest child pornography rings.
Agents of the IRS Criminal investigation division were able to trace some of the one million bitcoin addresses found on the “Welcome To Video” darknet site to a South Korean man’s server hosting some 250,000 child abuse videos.
A filing by Jesse Liu, the U.S. Attorney for the District of Columbia, said “law enforcement was able to trace payments of bitcoin to the Darknet site by following the flow of funds on the blockchain.”
Interestingly, Wray used the question to turn the discussion to a topic on which the FBI and the Justice Department have had no qualms at all about calling for legislation—encryption of mobile phones and chat messaging services.
Wray told Romney that cryptocurrency encryption is “part of a broader trend” of criminals and terrorists becoming more sophisticated with “various types of technology that anonymize their efforts… [like] default encryption on devices and messaging platforms.”
The Justice department has asked both technology companies and legislators for “back door” access into encrypted communications on smart phones and messaging platforms for a decade—long enough, in fact, that the fight was over Blackberry encryption.
In October, Wray called Facebook’s plans to encrypt its three messaging platforms—Facebook Messenger, Instagram, and WhatsApp—a “dream come true for predators and child pornographers,” according to CNBC. The Justice Department tried—and failed—to get a court to force Facebook to build in access for law enforcement, just as it did with Apple’s iPhone in 2016.
In July, William Barr became the latest in a long line of Attorneys General to jump into the debate at a cybersecurity conference, saying that “warrant-proof encryption… [is] converting the internet and communications platforms into ‘law free’ zones… This technology is quickly extinguishing our ability to detect and prevent a wide range of criminal activity.”
Wray essentially repeated that to Romney, saying, “[w]e are moving, as a country and world, in a direction where, if we don’t get our act together, money, people, communication, evidence, facts, all the bread and butter for all of us to do our work will be essentially walled off.”As for the Welcome To Video case, John Jefferies, chief financial analyst at blockchain forensic firm CipherTrace, told Modern Consensus that law enforcement is “getting smarter about cryptocurrency evidence identification and collection. They are training officers and agents. They are more widely deploying advanced tracing tools… to follow the money through dark markets effectively.”