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Bitcoin is a web-based digital currency that relies on complex
cryptographic algorithms to move money around quickly and
anonymously with no need for a central authority to process
transactions.
That has made it attractive to a variety of users, including
those who want to get around capital controls and those who
support a currency that is free from government control for
ideological reasons. But it has also attracted drug dealers,
arms dealers, and the buyers and sellers of online child
pornography.
The UK-based IWF, which aims to eliminate child pornography on
the internet, has given Elliptic - which identifies illicit
activity on bitcoin's public ledger of transactions, the
blockchain - a database of bitcoin addresses that it has
associated with the pornography.
"This is the first time anybody has started identifying these
crimes in bitcoin and flagging them up in a system like ours,"
said Elliptic CEO James Smith. "This is a great step ... towards
our goal of getting rid of any sort of illicit activity in
bitcoin."
Elliptic, which was named by accountancy firm KPMG this year as
one of 10 top emerging financial-technology start-ups, counts
the biggest U.S and European bitcoin exchanges as clients. It
also provides evidence to federal agencies in the United States
and Europe for major investigations involving bitcoin. That
makes the firm uniquely placed to take action, it said.
Elliptic will integrate IWF's data set into its
transaction-monitoring systems and will then alert clients when
it sees money moving from the addresses identified as bad actors
by IWF.
"Over the past few years, we have seen an increasing amount of
bitcoin activity connected to purchasing child sexual abuse
material online," said IWF Chief Executive Susie Hargreaves.
"Our new partnership with Elliptic is imperative to helping us
tackle this."
Elliptic said that although illicit activity on the bitcoin
network, including the buying and selling of child pornography,
was increasing, the proportion that made up of bitcoin
transactions was declining as bitcoin transactions continued to
grow in number.
(Reporting by Jemima Kelly, editing by Larry King)
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