Tracing Monero Transactions: Is It Really Untraceable?

According to reports, Finland has made advancements in tracing Monero transactions as part of an ongoing investigation for a criminal trial.

Finnish authorities achieve breakthrough in crypto forensics by tracing Monero in a major hack.

Last updated: January 28, 2024 04:52 EST | 2 min read

Source: Ruholamin Haqshanas

The National Bureau of Investigation in Finland has reportedly made significant progress in tracing Monero (XMR) transactions as part of an ongoing investigation into the criminal trial of Julius Aleksanteri Kivimäki.

Kivimäki stands accused of hacking a private mental health firm’s database and demanding ransom payments in cryptocurrencies.

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According to local media reports, prosecutors unveiled new evidence on January 22nd, revealing a crypto trail that led to Kivimäki’s bank account.

The alleged hacker had supposedly demanded 40 Bitcoin, equivalent to approximately 450,000 euros at the time, in exchange for not exposing records belonging to over 33,000 patients from psychotherapy service provider Vastaamo.

When the ransom went unpaid, Kivimäki purportedly targeted individual patients.

Finnish police claim that the hacker received payments in Bitcoin, sent the funds to a non-compliant Know Your Customer (KYC) exchange, converted them into Monero, and then transferred them to a dedicated Monero wallet.

Subsequently, the funds were reportedly sent to Binance, where they were exchanged for Bitcoin once again before being moved to various other wallets.

The local authorities have maintained confidentiality and have not disclosed further details regarding their on-chain analysis.

Source: Adobe/Shutter2U

Monero Uses Privacy-Enhancing Tech to Obfuscate Transactions

Monero is well-known for its strong privacy features, with its official webpage claiming it to be “untraceable.”

The cryptocurrency employs privacy-enhancing technologies such as Ring Confidential Transactions (RingCT), ring signatures, and stealth addresses.

RingCT mixes users’ transactions, obscuring the true source of funds, while ring signatures conceal the sender’s identity by presenting them as part of a group of possible senders.

Additionally, Monero’s stealth addresses allow for the generation of unique addresses for each transaction, making it difficult to link multiple transactions to the same recipient.

The ability of Monero and other anonymous cryptocurrencies to completely anonymize users has attracted scrutiny from authorities worldwide.

In 2019, Eric Woerth, the head of France’s National Assembly’s Finance Committee, proposed a ban on anonymous cryptocurrencies, including Monero, citing concerns about bypassing identification procedures.

Even United States authorities have closely examined Monero.

In 2020, the Internal Revenue Service (IRS) offered a bounty of up to $625,000 to anyone who could break the purportedly untraceable privacy coins.

As reported, ransomware attackers are increasingly asking for payments in privacy coins like Monero, while still mostly accepting Bitcoin (BTC) payments but with a premium.

“Most of the groups and strains listed as using XMR are relatively new,” crypto intelligence company CipherTrace said in a report.

In total, CipherTrace data revealed that at least 22 ransomware groups, not all of which are currently active, accept only XMR, while another seven accept both BTC and XMR.

The analysts found over 50 groups and strains that use XMR, but the list of those using BTC is well over 1,000.

For instance, cybercriminal hacking group DarkSide, which is probably best known for attacking Colonial Pipeline, accepts payments in both BTC and XMR but charges 10% – 20% more for payments in BTC.

Q&A

Q: Can Monero transactions be traced?

A: Although Monero is known for its privacy features, recent developments in the investigation of Julius Aleksanteri Kivimäki’s criminal trial indicate that Monero transactions can be traced, at least to a certain extent. Finnish authorities have made progress in linking Monero transactions to Kivimäki’s bank account.

Q: How does Monero ensure privacy in transactions?

A: Monero employs various privacy-enhancing technologies to obfuscate transactions. These include Ring Confidential Transactions (RingCT), ring signatures, and stealth addresses. RingCT mixes users’ transactions, ring signatures conceal the sender’s identity, and stealth addresses generate unique addresses for each transaction, making it difficult to trace transactions back to the parties involved.

Q: Are there any concerns about Monero’s privacy features?

A: Monero and other anonymous cryptocurrencies have faced scrutiny from authorities worldwide. Some argue that the complete anonymity provided by Monero could allow criminals to bypass identification procedures. In response, proposals for banning anonymous cryptocurrencies have been made in some countries, raising questions about the balance between privacy and regulation.

Future Outlook and Investment Recommendations

As the investigation into Monero transactions continues to unfold, it highlights the increasing efforts of authorities to trace and monitor privacy-focused cryptocurrencies. While Monero’s privacy features have attracted attention and scrutiny, it remains to be seen how effectively these technologies can be countered.

Investors interested in cryptocurrencies should consider the potential regulatory risks associated with privacy coins like Monero. The ongoing debates and proposals for banning anonymous cryptocurrencies could impact their long-term viability and adoption.

However, it’s essential to remember that cryptocurrencies are still an emerging asset class, and their evolution, along with regulatory developments, will shape the future landscape.

Investment recommendations should always be based on a thorough understanding of the risks involved and thorough market research. Considering a diversified portfolio that includes different types of cryptocurrencies may be a prudent approach for investors who wish to participate in this dynamic and evolving market.

References

1. Finnish Authorities Traced Monero Transactions Tied to Vastaamo Hack
2. X-App Announces Plans to Launch Peer-to-Peer Payments Feature in 2024
3. Spot Bitcoin ETF Bidding War Heats Up, Applicants Drop Proposed Management Fees Ahead of Expected SEC Approvals, Next BTC Price
4. Attacking Colonial Pipeline
5. Follow Us on Google News

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