The US government appears to own a significant amount of Zcash, a privacy-focused digital asset, according to a new study analysis by Arkham Intelligence.
The position, worth approximately $1.5 million, reportedly stems from assets seized during the 2017 takeover of the AlphaBay darknet market.
Arkham said it linked the funds to government-controlled portfolios through transfers related to the Justice Department’s investigation into the market.
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 vast cryptocurrency inventory.
The US government currently owns nearly $30 billion in Bitcoin and $187 million in Ethereum, obtained primarily through similar seizures by law enforcement.
Meanwhile, the revelation highlights a unique tension in which the government holds an ace designed to cover up the financial trails that regulators are trying to illuminate.
This comes as policymakers intensify their focus on illicit financial risks, putting Zcash and similar protocols at the center of the regulatory debate.
These tensions will take center stage on December 15, when Zcash founder Zooko Wilcox, Aleo Network Foundation CEO Alex Pruden, and SpruceID founder Wayne Chang participate in 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 is intended to give the agency a clearer picture of modern privacy tools. She noted that new insights can help the regulator refine its supervisory approach without infringing on civil liberties.
The Zcash traceability debate
The government data follows a separate, controversial claim by Arkham that it successfully attributed more than half of all Zcash activity to identifiable entities.
In the December 8 post, the company stated that its service has linked more than 53% of all transactions (both open and private) to well-known individuals and organizations.
It added that more than 48% of inputs and outputs are 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 takes place in “transparent” mode, which is publicly visible on-chain, similar to Bitcoin, making it an easier target for attribution.
However, Zcash’s shielded transactions, which encrypt transaction metadata, have proven much more resistant to analysis.
Wilcox too doubtful 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 company’s data largely reflects activity on Zcash’s transparent addresses rather than a violation of its core privacy architecture.
Arkham has not yet released full methodological details CryptoSlate could not independently verify the scope of its tracking capabilities.
Despite the criticism, Zcash was one of the best performing major tokens of the year.
Assets have risen more than 1,000% in recent months, peaking above $700 in November before returning to current levels of $434, according to CryptoSlate facts.
Due to this strong price performance, the token has generated renewed institutional interest, with Grayscale recently filing for a spot-focused exchange-traded fund (ETF) for the asset.