BitBeat: New Blockchain Alliance Seeks to Ferret Out Bad Guys, Bolster Bitcoin …


The Silk Road’s Ross Ulbricht, right, typifies the public face of bitcoin. The Blockchain Alliance hopes to change that perception.
Reuters

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Bitcoin has a reputation as a darling of the dark-web set, a conduit for all manner of illegal activity. A group of civic-minded bitcoiners is trying to change that through a new partnership with law enforcement in the U.S. It might just help catch bad guys, too.

The group is called the Blockchain Alliance, and it was created by Coin Center and the Digital Chamber of Commerce, two bitcoin trade groups based in Washington, D.C. It’s a private-sector initiative, but its goal is to create an open-ended dialogue with the public sector, specifically law enforcement agencies.

Bitcoin’s volatile, wild days have receded, but it still carries with it a notorious reputation as a tool of drug dealers and criminals, a reputation forged by high-profile scandals like the collapse of the early bitcoin exchange Mt. Gox and the capture of Ross Ulbricht, the Texas man convicted in February of running the online drug bazaar called the Silk Road.

“This is an ecosystem that has a lot of companies trying to build businesses on top of the technology,” said Jerry Brito, the executive director of Coin Center, “and to the extent that it’s associated with crime, that’s no good.”

The idea for the alliance grew out of a series of conversations among bitcoin industry leaders earlier this year about the currency’s potential and its obstacles, said Jason Weinstein, a former deputy assistant attorney general at the Department of Justice and currently a partner at the law firm Steptoe Johnson who is the alliance’s director. The use of bitcoin by criminals, and the image problems associated with it, were seen as a key problem, and this group was proposed as a solution.

Mr. Weinstein’s Washington office will be the contact point for both law enforcement and the bitcoin community, essentially acting as a call center for members. “It’s really meant to be a very simple, cost-free resource for law enforcement,” he said. “It’s one-stop shopping for law enforcement to get education and technical assistance on the issues.”

A handful of agencies are participating, including the Department of Justice, the FBI and U.S. Marshals Service, the Secret Service, the Department of Homeland Security’s Homeland Security Investigations division, and the Commodities Futures Trading Commission. Bitcoin firms involved include bitcoin companies CoinBase, BitFury, BitPay, Kraken, Blockchain, Xapo, Circle Internet Financial, MIT Media Lab Digital Currency Initiative and developer Gavin Andresen.

“The truth is,” said Kathryn Haun, an Assistant U.S. Attorney in the Department of Justice’s San Francisco office, “these kinds of alliances exist whether formally or informally in numerous industries. Yes, we have different goals than they do, but sometimes those goals overlap, and that’s not different here with the Blockchain Alliance.” Her task force has been at the forefront of prosecuting crimes involving digital currencies – she was the lead prosecutor in the case against the former government agents Carl Force and Sean Bridges, who were convicted of embezzling money from Mr. Ulbricht of Silk Road – and has already developed relationships with a number of firms. “The overwhelming majority of [bitcoin] companies don’t want criminal activity on their platforms.”

The government has gotten better at understanding bitcoin and the technology behind it, but the government still can learn from industry insiders, said Jason Brown, assistant to the special agent in charge at the cyberintelligence division of the Secret Service’s Investigations Division. Having an open dialogue between law enforcement and the people who are developing the technology is good for all involved, he said. “It all comes back to what we’re trying to do,” on both sides, he said.

Email: paul.vigna@wsj.com; Twitter: @paulvigna

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