How the police can track cryptocurrency miners who are operating without legal permit

By Christian Bartsch

Centuries ago people moved to America during the gold rush. They were so eager to get gold that they endured dangers and unhealthy living conditions.

In today’s world, cryptocurrencies are the new gold. People are mining with their computers using their CPU or graphics cards. Some go to the extent to buy noise ASIC miners (e.g. Antminer S9). Not every country is the ideal place to enjoy this fascination.

Countries like China are no longer happy with the excessive energy consumption of large cryptocurrency mines. The threat of cryptocurrencies to a government’s power of control fuels an additional drive to stiffen the activities of cryptocurrency enthusiasts. In some countries, it is even a crime to own cryptocurrencies.

Tax rules vs. innovators

On the other hand, there are countries that are welcoming the miners or are aware they have to allow a certain freedom to cryptocurrency investors. Countries such as Italy see a chance to escape the economic turbulences by motivating their citizens to modernize their way of doing business. Even Germany saw itself forced to become more liberal for a certain period of time. In Germany, tax rules keep changing every few years. That keeps tax advisors busy and costs the economy quite some resources. Nevertheless, this German powerhouse has been able to offset this disadvantage until now.

The European Union has now put into effect a new ruling (“Know your clients”), that forces cryptocurrency companies and more liberal governments to put disclose cryptocurrency enthusiastic citizens. It is supposed to be labeled as a way to fight terrorism. Nevertheless, this argument does not really fit with mining companies, because the current ROI for the typical investment levels of under 10k would not be sufficient to finance evil acts against mankind. A mining package of $2500 will deliver back the exact amount paid into the provider in 3 years. Anything beyond will start generating profits. Hence, this is not really a helpful way for terrorists to finance their activities.

Blockchain for industrial purpose

The actions of particular politicians are driven by a negative mindset that is trying to defame the cryptocurrency industry. Even if companies are using the Blockchain for industrial purpose but not for creating Bitcoins they will be seen as potential threats to the establishment. Their thirst for a transparency still allows for massive tax evasion, which is not a realistic option for the common citizen of most European countries. Being able to control a citizen’s financial assets is a good way to silence a critical mind.

An authority can destroy a person’s reputation by locking up bank accounts, known cryptocurrency wallets, confiscating physical assets (Gold, company shares & real estate properties). Without this, a person becomes financially broke and unable to meet his financial duties, which leads to his credit reputation being damaged for decades. It is up to the citizen to then seek legal compensation for the damages the state caused. The power of governments is not easy to neutralize but with the right approach, it is possible to succeed at court. Even the road to a legal complaint at an international court is a likely option.

As governments are trying to make the many miners and their clients visible to their registration services, they can make use of the power grid. A typical household will use power in a certain range. Even if they are wasting energy due to carelessness, they will not exceed certain limits.

forensic technology and artificial intelligence

Based on these typical avatars the authorities can make use of forensic technology and artificial intelligence to seek out those who are creating coins. Their energy consumption will exceed. Even countries like Iceland are using this power consumption data to locate miners and thieves. With very few citizens living there, it is easy to see who suddenly has started consuming a lot of power.

The current situation is becoming difficult to clarify tax and regulatory mess. Lawyers and tax experts are unsure what is allowed and what is not. Governments are changing direction when they fear certain trends. This leaves the cryptocurrency world like a wild west that is currently being cleaned by the authorities. The EU transparency act will drive investors outside of the European Union. Maybe it might even kill business opportunities that would have lead to a much-needed job-creating trend.


Christian Bartsch
Digital Forensics Expert and Author of 2 books on Crypto Currencies.