January 2017 saw a Danish 20 year old convicted for drug trafficking by way of analysis of bitcoin tranasctions, the second such time in Denmark. The man in question was trafficking Amphetamines, Cocaine, and Ketamine.
The Head of the Danish police’s cyber crime unit NC3, Kim Aarenstrup, stated to Berlingske that the police have already built a system to analyze bitcoin transactions and have resulted in two drug trafficking convictions. Previous cases were unsuccessful as investigators hit a dead end in cyberspace, and could not track flows of money.
Aarenstrup claims that bitcoin is a “heavily-used tool by criminals” and describes the police’s new system as “ground-breaking.” Aarenstrup went onto say:
“We are pretty much unique in the world at this point, because there not really any others who have managed to use these trails as evidence. Everyone in this field is looking towards Denmark, and we are in close dialogue with a number of other countries right now, so we can further develop out methods and teach them how we do it.”
While bitcoin is perceived as an anonymous currency, individual’s identity can be worked out with cross-referencing bitcoin transactions publicly shown on the blockchain, exchange profiles, where official documents are required to trade, and other key strands of information.
The Danish system works on these principles, corelating transactions where bitcoin are used to purchase illicit goods, with transactions listed in the blockchain as well as other information on users, according to Jesper Klyve, the Danish prosecutor who made the first ‘bitcoin’ drug trafficking conviction.
The Danes will share this method with Europol and the FBI to ramp up the pressure on those involved in transactions on Dark Net marketplaces. But the move by the Danish cybercrime unit may just displace bitcoin as a payment for illicit goods, where a shift by vendors and buyers toward the anonymous cryptocurrency Monero may invalidate their efforts.
While many organizations have attempted to link identities to bitcoin transactions by using the blockchain, few have accounted for a possible upsurge in the use of Monero by cybercriminals, with BITCRIME’s Dr. Paulina Pesch stating in an interview with BTCManager, “In BITCRIME we focused on cryptocurrencies, such as bitcoin, and have not investigated alternative systems, such as Monero.” Pesch also highlights that initiatives such as NC3’s will help to separate the legal users of cryptocurrency, who will use bitcoin, and criminal users, who will use Monero.
By publicizing the police’s system, the Danish task force hopes to discourage users from buying or selling illicit items and substances on the Dark Net:
“I just want to say to those out there in the criminal community that they need to be careful, because we can follow them. They should not think they can hide from the police anymore.”