CipherTrace was bought by Mastercard last year.
The company is a part of an industry monitoring the $14 billion per year intersection of cryptocurrency and crimes.
The company looks through various daily transactions on blockchains, searching for illicit movements or red flags. If an address is suspicious, it’s flagged. The companies, including others like Chainalysis, TRM Labs and Elliptic, cast their services as a necessary thing to normalize crypto and weed the criminal element out.
The company said its definition of “honeypot” included a “security term referring to a mechanism that creates a virtual trap to lure would-be-attackers,” according to a statement given to CoinDesk, though the report notes that this doesn’t really explain the application for on-chain activity such as crypto.
In addition, CipherTrace says it no longer uses those tactics now.
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But the report notes that CipherTrace’s website promoted both crypto money pots and honeypots as of very recently.
Asked about whether the company was collecting IP address data to link to wallet addresses, CipherTrace said it did not. But the company didn’t answer a question about whether it maps the IPs to wallets.
CoinDesk reports that tracing companies have been a fixture in crypto’s institutions, trying to combat the perception that bitcoin is mostly a crime-financing tool. Companies like CipherTrace and others sift through the data to identify the ones that are financing crime.
That said, privacy advocates have said bitcoin’s transparency should be independent of the state – and so CipherTrace and others’ work is a “betrayal” and an “invasion of privacy,” with comparisons to how centralized web analytics companies collect IP addresses and use cookies to track them site to site, the report says.
PYMNTS wrote recently that Mastercard’s buying of CipherTrace happened because the payments giant thought the digital assets giant could only succeed if there is trust there, especially as regulations are still looming.
See also: Mastercard’s CipherTrace Deal Brings Trust and Blockchain Forensics to Crypto Space
