America's Defense Advanced Research Projects Agency, better known as DARPA, has turned to analytics firm Inca Digital to build out a new crypto mapping tool to analyze the impact of cryptocurrencies on U.S. national security.
The terms of the small business innovation (SBIR) contract will also give information about the role crypto plays in illicit finance.
Specifically, Inca Digital’s government contracting division will “provide insight into the use of blockchain-based technologies linked to money laundering, terrorist financing, and sanctions evasions across systems.”
The research effort will also unpack how crypto is moving throughout the ecosystem, key on- and off-ramps, and how crypto may impact traditional finance, among other objectives.
DARPA is a research agency within the U.S. department of defense and works closely with the military to develop new technologies. The agency also played a key role in developing some of the first iterations of the Internet.
Inca Digital’s CEO Adam Zarazinski told Decrypt that the tooling is used to "provide data, analytics, and expertise to many of the world's leading exchanges, financial institutions, regulators, and government agencies. Inca Digital's clients use its unique and comprehensive intelligence to surveil digital asset markets, fight crime, generate alpha, and more."
Once launched, the mapping tool will be available to the U.S. government as well as private firms, joining the ranks of other on-chain sleuthing services from firms like Chainalysis and CipherTrace.
The firm has already released "parts of the tool to U.S. government agencies and financial institutions," Zarazinski said. Two pieces, including an analytics tool that tracks scammers and hackers in "near real-time" as well as a "cross-market surveillance tool," were already developed in partnership with DARPA, he added.
Crypto crackdown in the United States
The new research effort comes amid growing regulatory concerns and crackdowns in the world of crypto.
In August, the U.S. Treasury Department blacklisted the Ethereum mixing service Tornado Cash.
The department added the project’s website and various Ethereum addresses to its specially designated nationals list. This list is typically reserved for terrorist organizations and international criminals.
Shortly after the blacklisting, an open-source developer who worked on Tornado Cash was arrested in Holland.
"Crypto is very important for national security—both as an imperative where we should be focusing on innovation here in the U.S. and supporting the industry, while also tracking where bad actors may be using crypto to evade U.S. sanctions, fund nuclear proliferation, and de-dollarize," concluded Inca's Zarazinski.
Editor's note: On September 26, 2022, at 3:45 am EST, this article was updated to include comments from Inca Digital CEO Adam Zarzinski.