Can the Government Track Bitcoin?

In addition to data analysis conducted alone or in collaboration with private companies, authorities may request data from centralized exchanges. As a result of the regulation, centralized exchanges are obligated to share such information. However, not all cryptocurrency exchanges cooperate with the authorities.

A centralized exchange is a cryptocurrency exchange managed by a single entity, such as Coinbase. Centralized exchanges must comply with regulations to become a licensed operator in a country or state.

For example, to reduce the anonymity and illegal use of cryptocurrencies, most centralized exchanges include Know Your Customer (KYC) checks. KYC means to verify customers & rsquo; Identities alongside helping authorities analyze activity on the blockchain. In practice, individuals have to submit various documents and information before they are allowed to trade, invest and trade.

After KYC is conducted, exchanges may be asked or forced to share that information with law enforcement agencies. Since the exchange has individuals & rsquo; Personal information and transaction data, so the government. Using data from centralized exchanges, the IRS can identify anonymous Bitcoin wallets using KYC checks and related personal information.

However, not all exchanges use KYC. For example, since decentralized exchanges (DEXs) have no headquarters and are not run by a central company or a small group of individuals, it is difficult to enforce regulations.

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