Cryptocurrency Titan Coinbase provides ICE with “geo-tracking data”.

Coinbase, the largest Cryptocurrency Exchange in the United States, Immigrations and Customs Enforcement sells a set of features used to track and identify cryptocurrency users, according to contract documents shared with The Intercept.

News of the deal, which may be worth as much as $1.37 million, was first reported last September, but details on exactly what capabilities will be offered to ICE’s controversial Homeland Security Investigations division have been unclear. But a new contract document obtained by Jack Poulson, director of the watchdog group Tech Inquiry, and shared with The Intercept shows that ICE now has access to a variety of forensic functions tracked by Coinbase Tracer, the tool for collecting Information from the company (formerly known as Coinbase Analytics).

Coinbase Tracer enables customers in both the government and private sectors to trace transactions across the blockchain, a distributed ledger of transactions essential to using cryptocurrencies. While blockchain ledgers are typically public, the sheer volume of data stored on them can make tracking money from donor to recipient exceedingly difficult, if not impossible, without the help of software tools. Coinbase markets Tracer for use in both corporate compliance investigations and law enforcement agencies, touting its ability to “investigate illegal activities including money laundering and terrorist financing” and “cassociate [cryptocurrency] Addresses to real-world entities.”

According to the document, released at the request of the Freedom of Information Act, ICE is now able to track transactions made across nearly a dozen different digital currencies, including bitcoin, ether, and tether. Analytics features include “Multi-hop link analysis for inbound and outbound funds,” which gives ICE insight into the transfers of these currencies, and “Transaction unmixing and shielded transaction analysis,” which aims to thwart methods some cryptocurrency Users use it to launder their funds or to camouflage their transactions. The contract also provocatively provides for “historical geo-tracking data,” though it’s unclear exactly what that data consists of or where it came from. An email released by the FOIA request shows that Coinbase did not ask ICE to agree to an end user license agreement, a standard legal phrase that limits what a customer can do with software.

When asked about the ICE contract and associated data, Coinbase spokeswoman Natasha LaBranche referred The Intercept to a disclaimer on its website that states, “Coinbase Tracer obtains its information from public sources and does not use Coinbase user data.” LaBranche did not answer questions about how ICE uses Coinbase Tracer, nor whether the company has set limits on its use.

Coinbase has made a concerted effort in recent years to introduce its intelligence capabilities to government agencies, including the IRS, the Secret Service, and the Drug Enforcement Administration. Earlier this month, Coinbase’s vice president of global intelligence, John Kothanek, testified before a congressional panel that his company is eager to support the homeland security cause. “If you are a cybercriminal and you are using crypto, you are going to have a bad day. … We’re going to track you down and we’re going to find that funding and we’re going to hopefully help the government confiscate this crypto.” Coinbase’s government work has proven highly controversial for many crypto fans, perhaps due to both the long-standing libertarian Vein in this community as well is due to the fact that these currencies are so commonly used to facilitate various forms of fraud.

The Coinbase Tracer tool itself was born into controversy. In 2019, Motherboard reported that Neutrino, a blockchain analytics company it acquired to develop Coinbase Tracer, “was founded by three former employees of Hacking Team, a controversial Italian surveillance provider involved in the sale of spyware to governments on several occasions.” Human rights records like Ethiopia, Saudi Arabia and Sudan were caught with dubious intentions.” Following the public outcry, Coinbase announced that these employees were “quitting” from the company.

Homeland Security Investigations, the division of ICE that bought the Coinbase tool, is tasked not only with immigration-related matters, assisting raids and deportations of migrants, but also with broader cross-border crimes, including various forms of financial crimes. It is unclear for what purpose ICE will use Coinbase. The agency could not be immediately reached for comment.

Correction: June 29, 2022

In a previous version of this article, a quote by Coinbase Vice President John Kothanek was misattributed to the company’s CEO, Brian Armstrong.