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The Internal Revenue Service is using bitcoin transaction tracing tools developed by startup Chainalysis, according to a new report.

Documents obtained by Washington publication The Daily Beast show that the tax agency has been using the startup's software since 2015.

Additional data from the General Services Administration, which handles the US government's logistics, indicates that the IRS has an active contract with Chainalysis that is valid through the beginning of September. To date, the IRS has paid Chainalysis more than $88,000.

The IRS states in the documentation that it's using the software to "trace the movement of money through the bitcoin economy," going on to explain:

"This is necessary to identify and obtain evidence on individuals using bitcoin to either launder money or conceal income as part of tax fraud or other Federal crimes."

While it's no secret that US officials are interested in closer oversight of cryptocurrency activities – a group of influential senators pushed for this kind of policy shift in late May – the IRS contract is notable given the tax agency's investigation of potential tax avoiders and its ongoing lawsuit against exchange startup Coinbase.

As previously reported by CoinDesk, the IRS wants to obtain several years' worth of data on customers of Coinbase.

The startup has pushed back against the IRS in federal court, ultimately forcing the tax agency to narrow its information request. In recent days, groups like the libertarian think-tank Competitive Enterprise Institute and the Washington-based nonprofit Coin Center have moved to oppose the effort in subsequent filings.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Chainalysis and Coinbase.

Magnifying glass image via Shutterstock

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