Why Bitcoin Provides a Trail to Track Criminal Actors

The disappearance of 84-year-old Nancy Guthrie has drawn fresh attention to how crypto can be tracked, after investigators received alleged ransom messages seeking payment in Bitcoin.

Guthrie was last seen on February 1. Authorities believe she was taken from her home that day. As the search enters its second week, officials are reviewing several messages that reportedly demand cryptocurrency in exchange for her safe return.

Crypto has long carried a reputation for being tied to unlawful activity, a perception that grew after the 2013 shutdown of Silk Road, an illegal marketplace where users purchased illicit drugs and other contraband using crypto. Since then, however, greater regulatory oversight and more advanced tracking tools have altered how law enforcement approaches these cases.

According to Perianne Boring, founder and chair of the Digital Chamber, Bitcoin’s underlying technology makes transactions far more transparent than many people assume. She explained that every Bitcoin transfer is logged on a public database known as the blockchain. That ledger is accessible to anyone and provides a permanent record of activity tied to a particular wallet address.

Since the system is open for review, investigators can examine the movement of funds from the moment they are created. Boring said that this transparency makes it difficult to conceal payment trails. She argued that the structure of Bitcoin transactions can, in many situations, serve law enforcement more effectively than it does criminals.

Even so, she acknowledged that individuals can hold crypto independently, without relying on a bank or exchange. A suspect who controls a private wallet could receive funds directly. The challenge arises when that person tries to convert digital assets into traditional money. To complete that step, users generally turn to regulated exchanges, which operate under financial compliance rules that require identity verification. That process, often referred to as “know your customer” standards, can link a real-world identity to a transaction history.

Criminals sometimes attempt to complicate tracking efforts by transferring funds across numerous wallets or using so-called mixing services. These services pool digital assets from different users and redistribute them, making it harder to link specific coins to their source. Still, Boring notes that even these methods leave a trail. Investigators can see the funds entering and leaving a mixer, even if the path becomes more complex.

Over the past decade, specialized software has been developed to help exchanges and law enforcement analyze blockchain data. Compliance teams routinely use these tools to flag suspicious activity. Federal authorities, including the Department of Justice, have seized significant amounts of crypto in recent years as part of criminal investigations.

Crypto industry players like BitMine Immersion Technologies Inc. (NYSE American: BMNR) are banking on these evolving oversight systems to weed out bad actors so that the industry can attract more investment from institutional actors.

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