US Air Force Spends $800,000 on Chainalysis’s Crypto Services

The US Air Force has agreed a third deal with Chainalysis to use its blockchain analytics services for largely unspecified reasons.

The Air Force is coughing up $779,740 for its service according to the contract, which is dated May 19, 2020, and follows two other contracts carried out in the previous two years. Combined, the Air Force has now spent $900,000 on Chainalysis’s analytics services. But what is it paying for?

The contract is lacking for details, but a description tab references a “crypto currency data subscription.” This implies that the Air Force is making use of Chainalysis’s blockchain analytics tools, rather than using its analytics tools for non-crypto work. We reached out to both companies but Chainlaysis declined to comment and the US Air Force has not responded by press time.

Chainalysis is one of a few companies in the crypto space that examines transactions across a range of blockchains and uses analytics tools to try to glean as much information as possible from the data. It works with many government agencies, such as the FBI and the SEC, and its analytics tools are used to track criminal activity carried out using cryptocurrency.

Why might the Air Force need this?

We reached out to rival blockchain analytics firm CipherTrace, as well as NW3C, a company that trains law enforcement on high-tech crime, to get a better picture of what the US Air Force might be using these services for.

Casey Bohn, high-tech crime specialist at NW3C, said Chainalysis may be providing services to the Air Force’s Office of Special Investigations. “The OSI, for lack of a better term, is the Air Force’s internal FBI,” Bohn told Decrypt. The OSI investigates airman-on-airman crime, and other areas like fraud, waste, and abuse.

“Let’s say the Air Force lets a contract to Boeing, and there’s some accusation or supposition some way or another of some sort of fraud, waste or abuse, OSI would probably look into that on behalf of the Air Force,” he added.

So, Chainalysis’s data may be helping the Office of Special Investigations dedicate more time to investigating crimes involving crypto assets. “Criminal activity involving cryptocurrency is, I hate to say this, on the rise, I think people are trying to be more novel in how they may be hiding assets.” Bohn said, adding, “I personally have taught several IRS criminal investigations folks, and they’re starting to see in tax evasion and tax related crime, more and more cryptocurrency involvement.”

In addition, the Air Force might be “looking into nation state level threats,” John Jeffries, CMO and chief financial analyst at CipherTrace, told Decrypt. While nation state threats are diverse, some are particularly relevant to blockchain analytics. “It’s largely believed and perceived that most of the North Korean weapons of mass destruction have been funded through cryptocurrency thefts and ransomware campaigns,” he added.

A look at supply chain management

Alternatively, the blockchain data could be used for supply chain management.

“At the highest level, the Air Force is a pretty advanced technology arm of the military, and so they’ve been doing a lot of advanced work in blockchain around supply chain management,” Jeffries said, adding, “At its roots, the Air Force is deeply concerned about supply chains, which would have brought them to the blockchain table.”

Supply chain attacks are well understood in modern cyberspace. Advanced military systems are typically not connected to external, public networks, which means a cyber attack would have to penetrate the network locally, through supply chain vulnerabilities. This was the strategy that made the United States’ famous Stuxnet attack against Iran possible in 2010.

Bohn agreed. “Maybe they’re looking into using blockchain for aircraft parts or other sensitive items like munitions, or maybe they’re doing something as it relates to defence of the nation somehow,” he said.

“The Air Force has jets and crazy stuff that needs to be tracked, maybe they’re looking at building some sort of blockchain technology to track either aircraft components, which is a big thing, maybe they’re going to look at tracking weapons like missiles,” he added.

Either way, blockchain data is clearly becoming much more valuable.