DARPA devloping tool to assess Risks of Crypto to National Security

Blockchain, bitcoin, crypto assets, and virtual currencies have become a whole new vocabulary describing innovative technology to swiftly transfer value around the world. Blockchain originated just over 10 years ago. Since then, virtual assets have become widely available and have started to be used as payment products. Virtual assets have many potential benefits. They could make payments easier, faster, and cheaper; and provide alternative methods for those without access to regular financial products.

The fast-evolving blockchain and distributed ledger technologies have the potential to radically change the financial landscape. But, their speed, global reach and above all – anonymity – also attract those who want to escape authorities’ scrutiny. But without proper regulation, they risk becoming a virtual safe haven for the financial transactions of criminals and terrorists.

DARPA, the research and development agency of the U.S. Department of Defense, plans to analyze activity related to financial applications of distributed ledgers. The Defense Advanced Research Projects Agency (DARPA) contracted digital asset data and analytics provider Inca Digital in Sep 2022 to research national security risks posed by cryptocurrency.

The agency has awarded Inca Digital a Phase II Small Business Innovation Research (SBIR) to conduct this research in a project labelled “Mapping the Impact of Digital Financial Assets.”
Inca will develop a crypto ecosystem mapping tool to analyze crypto financial data and risk. Its aim will be to help the U.S. government and the private sector understand how crypto may be linked to money laundering, terrorist financing and sanction evading, as well as identify how cryptocurrency may affect traditional financial systems and vice versa.

“Given the increasing prevalence of digital assets, the Department of Defense and other federal agencies need to have better tools to understand how digital assets operate and how to leverage their jurisdictional authority over digital asset markets globally,” Adam Zarazinski, CEO of Inca, said.

DARPA’s contract further demonstrates the concerns government agencies have over crypto being used to fund crime, terrorism, rogue states and other malevolent actors, as well as their desire to get pro-active in thwarting them.

References and Resources also include:

https://www.fatf-gafi.org/publications/virtualassets/documents/virtual-assets.html?hf=10&b=0&s=desc(fatf_releasedate)