It’s the first time the U.S. Office of Foreign Assets Control (OFAC) has linked Bitcoin addresses to specific individuals. According to Bloomberg’s article published on November 29, 2018, the Treasury Department mentioned in a statement on Wednesday that the two Iran-based individuals, Mohammad Ghorbaniyan and Ali Khorashadizadeh, were responsible for facilitating ransom payments made in Bitcoin.
Identifying Illicit Actors in the Cryptocurrency Sector
According to Bloomberg, Khorashadizadeh and Ghorbaniyan helped Iranian hackers convert Bitcoin into the local US Currency. The Iranian-based individuals processed over 7,000 Bitcoin transactions, equating to millions of US Dollars. Some of the Bitcoin tokens received was during the SamSam ransomware attack, which targeted over 200 victims.
Although the cryptocurrency industry is a new and emerging sector, the US Authorities are, however, keen to ensure that any bad behavior in the market is stamped out. As a result, the authorities have revealed and published the specific address. While OFAC did not mention how they linked the Bitcoin address to Khorashadizadeh and Ghorbaniyan, OFAC was confident that cryptocurrency addresses can help compliance officers identify and assess any transactions that appear suspicious or illegal.
“We are publishing digital-currency addresses to identify illicit actors operating in the digital-currency space,” said Sigal Mandelker, the Treasury Under Secretary for Terrorism and Financial Intelligence. ”Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and anti-money laundering/countering financing of terrorism safeguards to further their nefarious objectives.”
OFAC Cracks Bitcoin’s Privacy Function
OFAC’s ability to reveal the true identities of individuals using the Bitcoin blockchain network brings into question how private Bitcoin transactions genuinely are. Satoshi Nakamoto initially designed Bitcoin to be impervious to Government control. The goal was for Bitcoin to facilitate anonymous transactions, where no one on the network would be able to know the true identity of each user. While Bitcoin payments are anonymous, they are, however, not private since all transactions are recorded on the blockchain, a distributed public ledger.
NSA Whistleblower Edward Snowden also mentioned at a decentralized internet conference that Bitcoin’s anonymity is highly misleading. In theory, any law enforcement agency could track a bitcoin transaction that has ended up in a wallet known for illegal activities. They could follow the transactions until it reaches a cryptocurrency exchange, where the owner exchanges the Bitcoin for fiat currency. Snowden noted that as the owner converts the cryptocurrency, law enforcement agencies could easily discover and identify the identity of the owner.
Although the Government has cracked Bitcoin’s anonymity feature, many new tokens have stronger inbuilt privacy features. Examples of these privacy tokens include Monero, ZCash, Dash, and PIVX. Unlike Bitcoin, these tokens have transactions that are not so easily viewable on the blockchain and nor are their addresses or wallet balances.