Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Why Blockchain analytics are catching Washington’s attention
Protocol | Benjamin Pimentel | Mar 16, 2022
In warning against the use of crypto by Russian oligarchs to evade war sanctions, Senate Democrats led by Elizabeth Warren cited data tools familiar to Wall Street and Silicon Valley but still obscure in Washington circles.
The senators, in a letter to the Treasury Department, pointed to the work of Elliptic and Chainalysis, whose programs scour billions of blockchain accounts and transactions in a global hunt for illicit transactions and hidden assets.
See: SEC Inks Deal With Blockchain Analytics Firm AnChain.AI to Monitor DeFi Transactions
The Ukraine war is giving new urgency to the already brewing battle over crypto regulations. And it has turned the spotlight on blockchain analytics as a key way to unmask the inner workings of crypto, particularly the way funds and assets are moved and stored in blockchain networks designed to be transparent but quasi-anonymous.
Chris DePow, a senior adviser for financial institution regulation and compliance at Elliptic:
“There has been a steady uptick in the demand for blockchain analytics services, with a particular spike in interest over the past month or so. The potential for the use of crypto for sanctions evasion … underscored the need for the implementation of adequate crypto transaction monitoring, wallet screening, forensics and crypto service provider due diligence.”
Blockchain analytics sprang from a need to crack down on bad actors when Mt. Gox, the crypto exchange, was hacked in 2014, the year Chainalysis launched. Eventually, the field began to attract the interest of law enforcement agencies as crypto increasingly became associated with money laundering and other crimes.
See: Department of Justice Publishes Cryptocurrency Enforcement Framework: “We see criminals using cryptocurrency to try to prevent us from following the money”
The Department of Homeland Security was the first major customer of Blockchain Intelligence Group, said Lance Morginn:
“Criminals are in the business of running and law enforcement is in the business of waiting — and waiting for them to slip up. Crypto may be “a pseudo-anonymous space,” he added. “But mistakes happen and then they can reveal who that person is by going to a choke point.”
The arrest of Ilya Lichtenstein and Heather Morgan on charges of laundering billions of dollars, for example, was unraveled in part by tracing a transaction on the blockchain from a wallet to a service used to buy a prepaid Walmart gift card.
Crypto’s rapid growth over the past few years led to more interest from other entities. These included big banks which, Morginn said, realized
“that if [banks] don't start today, they're going to be left behind and the Coinbases are going to become the new digital banks and threaten their existing business model.”
Blockchain analytics also drew more attention with the heightened focus on regulation and the need to comply with anti-money-laundering and KYC rules.
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