The IRS Wants to Track Privacy Coins
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July 3, 2020

The US Internal Revenue Service has reported it wants to track privacy coins, sidechains and layer-two solutions.

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According to a June 30 request for information published by the Treasury Department, the US Internal Revenue Service is seeking information and tools to help it track transactions that use privacy coins, layer-two solutions such as the Lightning Network and sidechains such as Plasma and OmiseGo (OMG).

Per the document, the institution has a special interest in the privacy-centered cryptos Monero (XMR), Zcash (ZEC), Dash (DASH), Grin (GRIN), Komodo (KMD), Verge (XVG) and Horizon (ZEN).

The IRS wants a solution that will allow it to "cluster transactions" from a single user that uses "privacy coins and obfuscation technologies," is able to compile a library of wallet addresses associated with "suspected or known to be involved in nefarious activities," and can identify other addresses associated with these wallets. In addition, the institution wants the system to include "a mechanism for sharing investigative research between investigators," a secure data export and import functionality as well as estimates of the cost and return on investment of the proposed systems.

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