The US government appears to hold a significant amount of Zcash, a privacy-focused digital asset, according to a new analysis by Arkham Intelligence.
The position, valued at approximately $1.5 million, reportedly stems from assets seized during the 2017 takedown of the AlphaBay darknet market.
Arkham said it linked the funds to government-controlled wallets through transfers associated with the Department of Justice’s investigation into the marketplace.
US GoTransactions (Source: Arkham Intelligence)The government has not commented on the specific findings regarding Zcash.
While the holding is notable given Zcash’s privacy features, it remains a fraction of the federal government’s massive cryptocurrency inventory.
The US government currently holds nearly $30 billion in Bitcoin and $187 million in Ethereum, which were acquired mainly through similar law enforcement seizures.
Meanwhile, the disclosure highlights a unique tension in which the government holds an asset designed to obscure the very financial trails regulators are trying to illuminate.
This comes as policymakers intensify their focus on illicit finance risks, placing Zcash and similar protocols at the center of the regulatory debate.
These tensions will be in focus on Dec. 15, when Zcash founder Zooko Wilcox, Aleo Network Foundation CEO Alex Pruden, and SpruceID founder Wayne Chang join a four-hour roundtable with the US Securities and Exchange Commission (SEC).
Hester Peirce, leader of the SEC’s crypto task force, stated that the discussion aims to provide the agency with a clearer view of modern privacy tools. She noted that fresh insights could help the regulator refine its oversight approach without infringing on civil liberties.
Zcash’s traceability debate
The government data follows a separate, controversial claim from Arkham that it has successfully attributed more than half of all Zcash activity to identifiable entities.
In the Dec. 8 post, the firm stated that its service has linked more than 53% of all transactions (both open and private) to known individuals and organizations.
It added that over 48% of inputs and outputs have been associated with an entity, bringing the total value of tagged operations to more than $420 billion.
The announcement sparked immediate debate among privacy technologists.
Critics noted that most Zcash activity occurs in “transparent” mode, which is publicly viewable on-chain, similar to Bitcoin, making it an easier target for attribution.
However, Zcash’s shielded transactions, which encrypt transaction metadata, have proven far more resistant to analysis.
Wilcox also disputed the implications of Arkham’s findings, arguing that the analysis does not represent a deanonymization of the protocol’s encrypted shielded pool. He said the firm’s data largely reflects activity in Zcash’s transparent addresses rather than a breach of its core privacy architecture.
Arkham has not released full methodological details, and CryptoSlate could not independently verify the scope of its tracing capabilities.
Despite the scrutiny, Zcash has been one of the year’s best-performing major tokens.
The asset surged more than 1,000% in recent months, peaking above $700 in November before retracing to its current level of $434, according to CryptoSlate data.
Due to this strong price performance, the token has generated renewed institutional interest, with Grayscale recently filing an application for a spot-focused exchange-traded fund (ETF) for the asset.
Source: https://cryptoslate.com/us-government-holds-zcash-privacy-security-debate/
