Crypto Asset Tracking

What is crypto asset tracking

Crypto asset tracking means the identification and evidencing the destination or source of crypto assets through the application of forensic accounting methods. Defrauded cryptocurrency funds are typically passed through complex layering/mixing schemes to conceal the trail of funds.

Each asset tracking exercise starts with the provision of transfers to be traced. Unlike in traditional finance, blockchain transactions may contain several transfers of funds occurring in one transaction, where only part of them should be subject to tracing. Therefore, tracking should always be executed on the lowest level of granularity which is a transfer and not a transaction, address or cluster.

Many blockchain analytics treat all consecutive transactions as dirty or tainted funds using ‘click-through graph tools’ (the so-called ‘Poison’ method). The poison method is not considered a forensic accounting method by many witness experts as it does not follow the rules of professional accounting and neglects the chronology of transactions. It does not distinguish between illicit and clean funds.