As more investors and criminals adopt hardware portfolios to protect their crypto assets, the U.S. Federal Revenue Service (IRS) is looking for new methods to access these portfolios in criminal investigations.

According to a document published on the official website of the tax agency in March this year, the IRS seeks help to hack so-called hardware wallets, physical wallets of cryptocurrencies.

IRS Criminal Investigation and its Digital Forensics Unit are now asking experts to find solutions to hack into cryptocurrency wallets that may be of interest in investigations, the document said.

"Decentralization and anonymity provided by cryptocurrencies have promoted an environment for storing and exchanging something of value, outside the traditional reach of law enforcement and regulatory organizations," says the document. "There is a part of this cryptographic puzzle that continues to elude organizations – millions, maybe even billions of dollars, exist in cryptocurrency wallets."

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The security of hardware portfolios presents a challenge for researchers. The document states that the agencies may be in possession of a hardware wallet as part of a case, but may not be able to access it if the suspect does not cooperate. This means that the authorities cannot effectively “investigate the movement of currencies” in that portfolio and can “prevent the confiscation and recovery” of the funds.

That is why the IRS wants researchers and contractors to come up with solutions to break into hardware portfolios. Crucially, the IRS does not want a single solution, but tools that can be used reliably in many cases in the future.

"The explicit result of this contract is to tame cybersecurity research in measured, repeatable and consistent digital forensic processes that can be trained and monitored in a digital forensic laboratory," says the document.

While the desire for a reusable tool makes a lot of sense, it is also what makes this request so challenging, according to Andrew Tierney, a security researcher who has done research on cryptocurrency hardware wallets.

“Hardware wallets are really getting quite secure now, with a lot of research on them. You may encounter problems with some, but it will be very difficult to have exploits ready to work against many of them, ”Tierney, who is also known as Cybergibbons, told Vice in an online chat.

He further explained how the funds may simply no longer be in the wallet after the invasion. "If the owner knows that they are attacking and can act, the funds can be moved."

According to cryptocurrency research firm Chainalysis, about 20% of all existing Bitcoin – equivalent to more than $ 100 billion – is trapped in inaccessible wallets.

"There's a lot of Bitcoin lost out there, it's like the 21st century of shipwrecks with treasures on board," Adrian Sanabria, a cybersecurity expert, told Vice.

U.S. IRS also goes after undeclared cryptocurrencies

The country's IRS recently signaled its intention to track and inspect cryptocurrency-related fraud even more rigorously than in the past. In March, the agency announced “Operation Hidden Treasure”, which aims to uncover undeclared cryptocurrency gains.

The document makes no mention of this operation and it is not clear whether it is connected to it or not. Regardless, as more and more criminals choose hardware wallets to protect their illegally purchased bitcoins, authorities clearly want methods to access them to find important evidence. For some, however, there may be easier and cheaper solutions.

According to Nicholas Weaver, a senior researcher at the International Computer Science Institute at UC Berkeley, this desire for the IRS is overkill. "For most of these devices, the choice of 'Give us the password or rot in prison for contempt' may suffice."

See also: Brazilian brokerage house has R $ 110 million blocked by the Federal Police

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