Zooko Wilcox Isn’t Concerned About the Government Trying to Track Zcash

The Department of Homeland Security wants to be able to better track and analyze private cryptocurrency transactions. In a pre-solicitation notice released by the DHS’s Small Business Innovation Research program on November 30, the organization states that it’s already “addressed bitcoin analytics,” so now it’s looking into performing forensic analysis for Zcash and Monero.

Being a preliminary proposal, the document doesn’t indicate any immediate action to this end. Rather, it solicits technical questions from “interested parties,” with an opportunity window that closes on December 18. It also mentions that blockchain and distributed ledger technologies are “being leveraged for a wide range of commercial and government applications,” and later goes on to note that “anonymity and privacy protection” are “desirable” features.

They’re not desirable, however, when they obscure illegal acts, says the DHS, and that’s what it wants to be able to trace by creating a product that will break through the privacy of Monero and Zcash transactions.

“Phase one” of the DHS’s proposal, if it moves forward, would be to create a new “blockchain analysis ecosystem or modify an existing one” that will specifically address privacy-focused coins. Phase two would be to demonstrate some use cases, and phase three would be to apply this to both the government and the private sector. KYC compliance would be a key issue for the latter, while the DHS only points to “state and local law enforcement operations” for the former.

Zcash founder and CEO, Zooko Wilcox, honestly “doesn’t really understand” why “people are interested” in this notice from the DHS, he told BREAKER via Twitter DM. “This isn’t interfering with Zcash,” he wrote. “In fact, the publication from the DHS mentions that these new technologies are being deployed for government and commercial use, and that privacy is desirable because the privacy protects *them* [asterisks his; “them” being the government and commercial users].” He went on to note that the “proliferating” applications of blockchain technology for commercial and government use mentioned in the DHS document bring up good use cases for privacy. He’s suggesting that the takeaways from this document have been all wrong—we shouldn’t see this as a sign that the government will de-anonymize cryptocurrencies like Zcash. Rather, “encryption may be required in blockchains/cryptocurrencies” to “protect users” in the near future. Coming from Zcash’s founder and CEO, that’s not a surprising statement.

The DHS is concerned about cryptocurrencies that offer anonymity for obvious reasons. In the past few months, for instance, Europol pointed out ISIS has requested donations in Zcash, and Monero has been the cryptocurrency of choice for crypto-jackers using mining malware. The SPLC also told BREAKER earlier this year that certain white supremacists had transitioned from transacting in bitcoin to Monero once they realized their bitcoin activity was being tracked.

The Zcash team offers lectures and workshops for law enforcement agencies, during which, wrote Wilcox, the first question is usually, “Can we come to you if we need to trace someone using Zcash?” Obviously, the answer is no—Zcash employees don’t have the ability. But maybe the government will figure it out with the help of those “interested parties.”

“This document is pre-solitication, which means there will be opportunity to get money from the government for this, so the response they can expect is some companies trying to figure out how to get that money :)” wrote Wilcox.

In the meantime, Zcash may get even more mainstream use. Coinbase, an exchange popular with new crypto users, announced today that it’s adding Zcash to its platform for retail customers, explaining in a blog post how the cryptocurrency’s privacy functions work (and directed readers to Zcash’s support page for more information). With the government interested in learning about Zcash, and Coinbase starting to support the privacy-focused crypto, Wilcox may not be wrong in his optimistic views on adoption.