Proof of State is the Wednesday publication of Fortune Crypto, featuring Leo Schwartz who provides exclusive insights on policy and regulation within the crypto industry.

The utilization of DNA testing in criminal investigations originated in England in 1986 before crossing over to the United States. By 1995, during the highly publicized O.J. Simpson trial, the public was still unfamiliar with this innovative crime-solving technology, leading to challenges for prosecutors in explaining the compelling evidence to the jury.

In contemporary court cases involving cryptocurrency transactions, ranging from money laundering to drug trafficking and child pornography, prosecutors are increasingly turning to a novel form of forensic analysis known as Blockchain analytics. Leveraging the transparent and immutable nature of various blockchains like Bitcoin and Tron, companies such as Chainalysis and TRM Labs can track activities back to individuals and entities, uncovering deceptive actions previously assumed to be discreet.

While Blockchain analytics is in its early stages akin to DNA testing in the past, it appears to be more comprehensible to juries and judges. In the recent Sam Bankman-Fried trial, prosecutors adeptly navigated through extensive evidence to demonstrate the illicit movement of funds through digital wallets and exchanges, ultimately leading to a conviction, aided by the substantial volume of supporting evidence.

Yesterday marked a significant milestone for this burgeoning field, now valued in the multibillion-dollar range. Tigran Gambaryan, a key figure from Andy Greenberg’s Tracers in the Dark, detailing the evolution of blockchain analytics and Chainalysis, was detained by the Nigerian government in his role as Binance’s top investigator. Additionally, a jury in Washington found Roman Sterlingov guilty of operating a crypto mixer to launder tens of millions of dollars from darknet marketplaces.

The recent Bitcoin Fog case did not primarily introduce groundbreaking inquiries regarding the intersection of privacy software and anti-money laundering regulations. The upcoming trial involving the Tornado Cash founders is anticipated to be more eventful as they aimed to establish an open-source software protocol rather than a centralized service.

The Bitcoin Fog case sparked debates about the reliability of blockchain analytics, with Sterlingov’s defense arguing against the admissibility of Chainalysis’ evidence linking illicit transactions to their client. Despite efforts to discredit blockchain analytics, the defense’s case weakened over time. The judge, Randolph Moss, conducted a series of Daubert hearings to assess the credibility of expert witness testimony, eventually ruling in favor of admitting the evidence in a comprehensive opinion on Feb. 29.

While some skepticism remains regarding blockchain analytics, Moss emphasized its role as one element among various pieces of evidence used by the prosecution. He highlighted the widespread adoption of Chainalysis within law enforcement and the financial sector, underscoring its credibility. The era of crypto tracing is only beginning, with ongoing debates and developments shaping its future.

For more crypto news and insights, you can reach out to Leo Schwartz at [email protected] or follow him on Twitter @leomschwartz.

DECENTRALIZED NEWS

• Grayscale has applied to launch a cost-effective version of its Bitcoin ETF to address investor concerns amid continuous outflows. (Fortune)
• Telegram, a prominent messaging platform, stands out as one of the few mainstream companies embracing Web3 technology. (Financial Times)
• President Biden’s latest budget proposal raises apprehensions regarding new crypto regulations, particularly concerning Bitcoin mining and wash trading. (CoinDesk)
• Bitcoin surged to a new all-time high of nearly \(73,000 on Tuesday before retracting below \)70,000, maintaining its impressive performance in the cryptocurrency market. (Bloomberg)
• Notable Bitcoin skeptic Jamie Dimon appears to be moderating his stance, expressing support for individuals’ rights to invest in the asset while retaining some reservations. (Fortune)

MEME O’ THE MOMENT

Don’t hold your breath for an ETH ETF:

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