German Parliament Faces Questions On Blockchain Surveillance

The German party Die Linke is questioning the German government's handling of confiscated cryptocurrency assets via law enforcement agencies in a small inquiry, a formal process in German parliament for MPs to pose questions to the government.

Die Linke asks "what development contracts, procurement, usage, and planning for future use exist on the part of federal authorities for which software that is or will be used for the seizure of cryptocurrency, and what are the minimum requirements regarding error rates and verifiability of the software and its results, as well as the criminal procedure requirements that necessitate its use?"

The inquiry references the development of blockchain surveillance research through German law enforcement agencies in cooperation with partner entities with the projects BITCRIME and TITANIUM to develop "software for the analysis of transactions" for the tracing and prevention of financial crime.

The inquiry further references the use of Chainalysis Reactor through law enforcement agencies in the German State North Rhine-Westphalia, noting that "in the view of the questioners, there currently seems to be no apparent evidence that the methods used for the forensic analysis of virtual payment flows meet scientific standards".

The scientific accuracy of Chainalysis Reactor had recently been questioned in the trial of alleged Bitcoin Fog operator Roman Sterlingov, which became known for "putting cryptocurrency tracing on trial".

Regarding mixers, Die Linke asks how the German government evaluates their legitimate use on one hand and the potential use for the concealment of criminal activity on the other, and what consequences the German government may draw for a potential mixer ban or regulation.

The inquiry states that "coinmixing" and other anonymization software "corresponds to a widely held need to protect one's privacy in times of ubiquitous technological surveillance by digital corporations and government authorities".

Reffering to scope, Die Linke asks how many cases have been referred to Financial Intelligence Units on suspicion of money laundering regarding cryptocurrencies and how many of the referred cases have resulted in criminal prosecutions, noting that criminal activity appears to only make up for a small portion of overall cryptocurrency transaction volume according to a 2021 report conducted by EUROPOL.

The inquiry further references a report conducted by Transparency International, which estimates the total transaction volume of money laundering activity to lie at over €100 Billion, noting that the portion of cryptocurrency value contributing to overall money laundering value is expected to be "negligibly small".

The inquiry is directed at the take down of several online portals ranging from movie streaming sites to darknet markets, which led to the confiscation of over €2 Billion in bitcoin.