Internal Revenue Service (IRS) has obtained a software tool allowing to track Bitcoin (Bitcoin) and other cryptocurrency addresses in order to route out potential tax evaders, The Daily Beast reported, quoting the contract of this purchase.
IRS purchased this software from the blockchain analysis group Chainalysis to be able to identifying people who hide their wealth.
This appears to be a reasonable move for IRS after the Bitcoin’s market cap skyrocketed over the recent months. The track-record of this cryptocurrency is really fascinating it gained more than 200% in six months and 30,000% in five years.
It must have been disappointing for IRS to announce that only 802 people declared Bitcoin losses or profits in 2015. This number is clearly less than the actual number of people trading the cryptocurrency.
Chainaylsis sold to IRS a refactor tool, which visualizes, tracks, and analysis transactions on the blockchain. IRS has paid Chainaylsis $88,700 since 2015 for its services.
While Chainalysis boasted it had information on a high percentage of Bitcoin addresses (25%), though those could be addresses with poor privacy practices. Chainalysis may not be able to unmask transactions where users have intentionally tried to obfuscate the transaction trail.
Moreover, certain cryptocurrencies like Dash, Monero (XMR/USD) and ZCash have inbuilt privacy features, which makes it difficult to track transactions.
So IRS might have hard times if tax evaders wold switch from Bitcoin to these less popular currencies.