When Adam Zarazinski served in Afghanistan for the Air Force he had the unenviable job of meeting with civilians whom the U.S. had wronged in some way – destroyed their home accidentally, or their car, or god forbid, had killed a family by mistake. He’d offer an apology from the U.S. government and an enormous reparation payment.

“I’d be in a Blackhawk helicopter with a security team flying around Afghanistan with a trash bag full of cash,” he told me recently.

Last year, he worked to help uncover how cryptocurrencies were being used in the disputed region between Russia and Ukraine, before the current war broke out. The firm he co-founded in 2018, Inca Digital, had a contract from the U.S. Special Operations Command to surveille who was using crypto, what types of coins were being used, who the largest holders were and other metrics in the Donbas region. Inca Digital quickly fingered one group, South Front, that was soliciting crypto to buy weapons on the dark web, Zarazinski said.

“We found out later that South Front is actually an organization that was already sanction by Treasury for interference in U.S. elections,” he said. The Treasury Department described South Front as “an online disinformation site registered in Russia that receives taskings from the FSB [Russian security forces].”

Zarazinski (r) at Camp Resolute Support in Kabul, Afghanistan

Inca Digital has emerged at a crucial point in the web3 development where analytics tools are in high demand. “We do data analytics across the digital asset ecosystem, so think of us like a cross between Bloomberg and Palantir,” Zarazinski said.

That means they collect market data form about 500 crypto exchanges as well as technical data they gather by running blockchain nodes, data from code repository GitHub and info taken from the dark web. They are not a forensics company like Chainalysis. One of the more powerful tools they have is collecting so-call natural-language data, which is created from news stories, social media posts from Twitter and Reddit as well as enforcement decisions from global regulators, among many other sources.

Customers include Fidelity, FTX, the Commodity Futures Trading Commission and the U.S. Department of Defense.

Read More: Editorial: Russia Can’t Evade Sanctions With Crypto

Now that war has broken out in Ukraine, Inca Digital is working with a U.S. government agency Zarazinski said he couldn’t name to monitor Russian citizens on the sanctions list for violations using crypto. There is a nuance, however, that’s been missing in most of the debate about crypto being used to evade U.S. sanctions, he said. The sanctions made it nearly impossible for Russian banks, oligarchs or government officials to interact with the global financial system because the U.S. touches so much of its infrastructure.

Yet crypto can be used outside of the reach of the U.S., making it an asset class to keep an eye on, he said.

“Sanctions make it really hard, make it really painful, to interact with the global economy,” Zarazinski said. “Even if you don’t want to use the correspondent banking system, in some ways you’re always touching something that has some counterpart in the U.S.

“But with crypto, it makes it a lot easier to move value globally without touching the U.S. system. Therefore, it weakens the power of U.S. sanctions globally.”

In the case of Venezuela, the adoption of crypto systems to evade U.S. sanctions has received substantial help from Russia, according to Inca Digital researchers. Because Venezuela has been cut off from global markets by U.S. sanctions since 2017, it has taken to selling gold through underground means, with the help of Russian businesses, they wrote. That prototype is now being used to create crypto infrastructure that could do the same.

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“Russia’s work with the [Venezuelan President] Maduro regime is more than just an effort to prop up a dictatorial regime within their orbit—they view it as a pilot project,” the Inca Digital researchers wrote in a Dec. 2020 research note.

Zarazinski is quick to point out that cryptocurrencies can’t be used to evade sanctions, not at the scale of the Russian economy. But because wealthy Russians can use crypto to preserve their wealth it’s the weakening effect that needs to be addressed.

“It’s not like crypto’s special,” he said. “You can do that with art, it’s not like these oligarchs have a USAA account with $10 billion sitting in there.”

So far Inca Digital has found only traces of sanctions skirting from some Russians, he said. Through their partnership with the Department of Defense, Inca Digital has access to closed data sources, which, along with information from leaked databases, are beginning to yield small clues about Russian crypto movements, he said.

“We have breadcrumbs,” Zarazanski said. “There’s no smoking gun, nothing specific I can give you at this time.”

For the larger digital asset space to be taken more seriously and to gain acceptance large firms like their customers Fidelity, the Department of Defense, FTX and the U.S. CFTC should be engaged and brought along for the crypto journey, he said.  

“Our big goal is to help large financial institutions and government agencies use crypto and therefore help grow the Bitcoin community. I want to see crypto grow, I want to see a Bitcoin ETF in the United States, I want crypto to be incorporated in the financial system writ large,” he said. “It’s only through working with all these agencies that crypto is going to grow.”