I don't know for sure however, a look at the entity's behavior suggests that it might try to determine if a certain node is reachable at a certain IP address by linking to their Bitcoin address.
But is this method possible by determining its bitcoin address that simple. Its clearly an attempt to do that and if forced thats a violation of privacy. Im wondering why the government wouldnt try to use a platform for this to hunt those scammers. Maybe it will be helpful but this will also be a chaos for those people who only eant their identity hidden.
Government can't use this method as mentioned that it was a violation of privacy even they don't try to show it to public. This is one of the pros but the one I consider cons is that once their system is hacked, it's possible that those data might leak. There's many events that have the same scenario just like this. For example Facebook was sued for the same situation where the CEO of Facebook ( Mark Zuckerberg ) was in court. Recently I've also seen the TikTok CEO also having the same situation which he had to defend the privacy data of it's users.