The United States of America (USA)’s National Security Agency (NSA) can identify Bitcoin users, and they have the capability since several years, as indicated by a report. The report was based on the classified documents that the whistle-blower Edward Snowden had provided.
The NSA has a system to harvest, analyze, and process raw internet traffic data from all over the world. The overall mass surveillance program under which this system operates is code-named OAKSTAR. The program is a collection of secret corporate partnerships, which allowed the NSA to extract communications data directly from the fibre optic connections underpinning the Internet. With respect to identifying Bitcoin users, a VPN-like service called MONKEYROCKET, which is a component of NSA’s mass surveillance program, has played a large part, by collecting data from network equipment.
As a VPN service, MONKEYROCKET was supposed to hide user-data, but it instead made this data available to the NSA for users in Europe, the Middle East, other parts of Asia, and South America. NSA had used MONKEYROCKET as part of their strategy to attract terrorists group into this network, whose communication the NSA could then monitor. The NSA has collected a large amount of Bitcoin user data including password and MAC address of their devices.
Bitcoin has put a lot of power in the hands of people since its inception, due to its decentralized nature. Governments and central banks can’t control Bitcoin, and for that matter, other cryptocurrencies. People with an urge to maintain the autonomy and privacy of the their financial transactions have naturally welcomed Bitcoin and other digital currencies. However, the other side of the equation is that almost since its inception, criminals have used the relative anonymity provided by Bitcoin to fund their illegal activities. This justifiably concerns the governments and central banks, and investigating agencies have a hard time in ‘following the money trail’ due to the relative anonymity. Many countries have banned Bitcoin fully or partially, for e.g. Iceland, Ecuador, Bolivia, Russia, Sweden, China, Thailand, and Bangladesh. One common concern these countries have is that criminal activities are funded using Bitcoin.
In January 2018, the Government of South Korea was actively considering banning all cryptocurrencies including Bitcoin in their country, and while public sentiment has made them to soften their stand, they still are very keen on regulating cryptocurrencies.
In February 2018, the Government of India (GoI) unequivocally declared that they will do everything to stop funding of criminal activities using cryptocurrencies. These general trends and specific events show that the governments and central banks are keen to ensure that cryptocurrencies don’t fund crime and terrorism. To put it simply, authorities are increasingly scrutinizing Bitcoin and the other cryptocurrencies. NSA‘s surveillance of Bitcoin users stems from the same concerns of national security, although experts are divided about the legality of NSA‘s approach, because in a court of law, evidences collected by such mass surveillance are inadmissible, because the government wouldn’t reveal the source of information.
While the report focused on the NSA‘s surveillance of Bitcoin users, it’s important to note that Bitcoin doesn’t provide complete anonymity, and an American Bitcoin mining and blockchain transaction processing company, Bitfury, has launched a set of tools that will de-anonymize Bitcoin users for the benefit of the law enforcement agencies. There are other cryptocurrencies that aren’t as famous as Bitcoin, but provide higher degree of anonymity, for e.g. Verge (XVG). It remains to be seen whether the government intelligence and investigating agencies will mount any surveillance program covering users of these other cryptocurrencies.
