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HM Revenue and Customs has significantly ramped up its ability to probe cryptoassets held by suspected tax fraudsters after signing a six-figure deal for investigative software.

Recently published procurement information reveals that, on 1 April, the department entered into a one-year deal which was directly awarded to specialist tech firm Chainalysis. The contract – which is valued at £844,604 – covers the provision of a “cryptocurrency investigation tool”.

In recent years, the tax agency has seen a growing need to probe cryptoassets as part of its anti-fraud operations. Last year, HMRC made its first-ever seizures of non-fungible tokens – digital tokens embedded with a unique signature.

The department has previously deployed training and technology from Chainalysis on a year-deal that immediately preceded the new contract. The outgoing engagement was valued at just £50,000, indicating that the department is significantly increasing its crypto capabilities. 

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In a statement issued to PublicTechnology, an HMRC spokesperson said: “It is important we keep pace with new developments in finance and technology by investing in our ability to tackle illicit financial activity, including tracing suspicious crypto transactions. This tool is one of many specialised tools we have to ensure everyone is paying the correct amount of tax, including those who hold cryptoassets.”

In addition to this contract, Chainalysis has previously won six-figure deals with Derbyshire Police and the Financial Conduct Authority.

The firm’s core product is Reactor which, according to its listing on the government’s Digital Marketplace, is an “investigation software that connects cryptocurrency transactions to real-world entities [and allows customers to] examine criminal activity, such as the movement of stolen funds, as well as legitimate activity like flash loans and NFT transfers”.

The HMRC contract comes a few weeks after the the National Police Chiefs' Council revealed its plans to invest almost £2m in technology that enable all police forces and law-enforcement bodies across the UK to investigate crime involving cryptocurrency and other blockchain technologies. On behalf of the NPCC, the City of London Police launched a tender process seeking software that can support forensic investigation of "all popular blockchains, tokens and non-fungible tokens”.