The IRS curious to know more about privacy-enhacing crypto coins. IRS-CI Cyber Crimes Unit asked its “industry partners” to clarify where the crypto-tracing community stands on privacy tokens, layer 2 protocols, sidechains and the Schnorr signing algorithm. This came as first stated by The Block in a Request for Information (RFI) of 30 June.
“There are few investigative resources for tracing transactions” that move across these privacy-enhancing vectors, the IRS said, noting a recent spike in illicit privacy coin use. “The CI Cyber Crimes program is working to get in front of this trend.”
The monero, zcash, dash, grin, komodo, verge and horizon privacy coins were picked out by the IRS. Also singled out were the sidechains Plasma and OmiseGo, and the Layer 2 protocol networks Lightning, Raiden, and Celer.
What’s good for user privacy is bad for investigative efficacy The IRS bemoaned the Bitcoin blockchain’s apparent plans to integrate Schnorr signatures, writing that such a move will undercut IRS agents’ current tracing techniques.
The tax agency seeks estimates of how much it would cost to “support this initiative” as well as return on investment estimates.