Cryptocurrency and Blockchain Needs for Law Enforcement
By Dulani Woods, John S. Hollywood, Jeremy D. Barnum, Danielle Fenimore, Michael J. D. Vermeer, Brian A. Jackson
The advent of blockchain-based technologies has opened a new frontier for individuals wishing to conduct financial and other transactions remotely, anonymously, and without the need for a third party like a bank. Blockchain technology has various uses but is perhaps best known as the foundation for a certain type of digital currency called cryptocurrency. Cryptocurrency is increasingly an accepted form of payment in many legitimate business transactions, but it is also used to facilitate many illegal activities, in large part because of its capacity to facilitate mostly anonymous transactions remotely. As a result, law enforcement investigators need to develop new skills, competencies, and tools for ensuring justice. In support of the National Institute of Justice, researchers from RAND and the Police ExecutiveResearch Forum conducted a workshop with law enforcement practitioners, academics, and other experts. Workshop participants identified and priorit ized 24 research and development needs that, if invested in, would improve law enforcement's ability to adapt to these societal changes. These needs pertain to policies for digital key management, resources for law enforcement training on blockchain and cryptocurrency, and tools for investigations involving cryptocurrency.
In this report, the researchers detail the proceedings of the workshop, discuss the ten highest-priority needs identified by the participants, and provide additional context based on the participants' discussions. The participants prioritized needs associated with raising the level of knowledge for officers and investigators, training or hiring experts who can assist with investigations, and adapting existing policies and procedures to ensure that cryptocurrencies are handled responsibly.
Key Findings
There are not enough law enforcement–specific blockchain and cryptocurrency training and experts to meet the demand for educating justice practitioners.
Cryptocurrency can be transferred by anyone in possession of an easy-to-copy digital key. Individuals with copies of the keys may move assets before an agency can take possession.
This digital key is merely a unique set of letters and/or numbers (i.e., text). This text allows the bearer to control digital assets of high value and should not be treated like other text-based information within a case file.
Seized cryptocurrency assets can be transferred by anyone in possession of a digital key to a digital wallet of unknown ownership. This presents opportunities for officer misconduct.
Blockchain and cryptocurrency are fast-moving, rapidly evolving technologies. Justice practitioners are having difficulty keeping up with the changes.
There is a lack of expertise in all aspects of blockchain and cryptocurrency technologies across the justice system.
Commercial cryptocurrency-tracking tools can be more expensive than an agency can afford. Open-source tools can require significant computing power.
Once a problematic cryptocurrency wallet is identified by law enforcement (via subpoena or another method), there is no good way to notify other interested investigators in other jurisdictions.
Recommendations
Identify best-practice policies and procedures for rapidly securing cryptocurrency assets during investigations.
Develop best-practice policies and procedures (e.g., two-person systems) to minimize opportunities for mishandling cryptocurrency.
Identify best-practice policies and procedures for handling, storing, transferring, and redacting digital cryptocurrency keys within record-management systems.
Catalog and publicize the training resources that are already available, including training that is not tailored for justice practitioners.
Develop regional or national sharing systems that facilitate sharing of training materials and actionable intelligence for ongoing cases (e.g., digital or cyber fusion centers).
Develop model materials that can be easily adapted for training recruits, investigators, forensics experts, prosecutors, judges, and others.
Conduct research to examine the balance of skills and expertise that law enforcement agencies look for when hiring and assess whether those are likely to meet current and future needs.
Convene a standing group of practitioners and experts who can examine the “state of the possible” and generate requirements for research and development organizations.
Work with federal, state, local, and private entities (e.g., the Regional Computer Forensics Laboratory, Lawyers Without Borders) to make available appropriate cryptocurrency-tracking resources so that costs can be more easily shared.
Assess the costs and benefits of developing a private-sector clearinghouse that will allow the public sector and vetted private-sector entities to coordinate (similar to how the National Center for Missing and Exploited Children screens potentially abusive materials.
Santa Monica, CA: RAND, 2023. 28p.