Bitcoin tracker Chainalysis, which uses data from public blockchains to unveil the identity of cryptocurrency users, has added four digital assets to its roster for real-time transaction monitoring services: Binance Coin (BNB), Gemini Dollar (GUSD), Tether (USDT) and USD Coin (USDC).
In addition to the four cryptocurrencies, the company tracks Bitcoin, Bitcoin Cash, Ether, Litecoin, Paxos Standard, and TrueUSD.
Chainalysis is the most widely used blockchain monitoring service. The blockchain forensics company says the additions were made in anticipation of global regulatory guidance that may require automated transaction monitoring for any cryptocurrencies global exchanges and financial institutions support.
Specifically, forthcoming guidance from the Financial Action Task Force (FATF), an inter-governmental, G7 initiative that sets global standards relating to anti-money laundering, is expected to be issued later this year. According to Chainalysis, the guidance will impact cryptocurrency regulations, as an early draft of the guidance suggests that industry leaders may need to employ systems to automate the monitoring and processing of transactions in order to combat illegal activity.
In addition to helping financial institutions and banks comply with know your customer (KYC) and anti-money laundering (AML) regulations, blockchain analysis tools have allowed law enforcement agencies to link real-life identities to Bitcoin addresses.
The FBI, SEC and the IRS have all used Chainalysis to track Bitcoin transactions to uncover illicit activities, from terrorist financing to drug dealing, by allowing law enforcement to search for every type of crypto criminal, from money launderers to tax cheats.
Data from digital assets research firm Diar shows that in 2018 the Internal Revenue Service allocated the highest spend on blockchain analysis among all federal agencies.
“According to Diar’s research, public records indicate that the US government agencies have entered purchase orders and contracts with blockchain analysis companies to the tune of $5.7Mn to date. Since the beginning of the year, the amount that the government agencies paid to blockchain analysis companies more than tripled. The vast majority of government deals have been contracted to New-York based Chainalysis.”
| Agency | Spend | Contracts |
|---|---|---|
| IRS | 2,191,835 | 9 |
| ICE | 1,537,945 | 9 |
| FBI | 1,142,671 | 12 |
| Fiscal Service | 330,552 | 3 |
| DEA | 215,333 | 9 |
| SEC | 184,480 | 7 |
| CFTC | 117,372 | 5 |
Source: Diar, contracts from among 7 different blockchain tracking companies
The company also works with Europol to track down criminals and other international law enforcement agencies.
Reports Diar,
“The pseudo anonymity of cryptocurrencies provides intelligence agencies with a paper trail, which can very often be decrypted by blockchain analysis companies. That information can be used as actionable intelligence with the possibility of leading to criminal prosecution. And the rapid rise in cumulative spending of intelligence agencies indicates that they are paying very close attention.”
In the wake of privacy scandals and concerns involving Facebook, Google, Twitter and social media accounts, Chainalysis has detailed how it interfaces with customer information.
“Exchanges that use Chainalysis KYT (Know Your Transaction) for AML compliance submit their transaction data—not personally identifiable customer data—to Chainalysis to automate the process of transaction monitoring. The alternative—manually checking every possible transaction for counterparty risk—would simply be unmanageable.
Any link from a transaction back to the person or people involved in that transaction must be made outside of Chainalysis because we do not collect any personally identifiable information from exchanges. Chainalysis only knows that a particular address belongs to a customer at that exchange, not who the customer is.”
The company says it’s adding new cryptocurrencies more quickly, enabling clients to meet regulatory requirements. They’ll also allow law enforcement to monitor more blockchains.
Although Chainalysis addresses legitimate concerns about illegal activities and offers solutions to help companies meet compliance, writer Kai Sedgwick, reporting for Bitcoin.com, says the company operates on behalf of law enforcement.
“The best known of all blockchain forensics firms, Chainalysis produces a wealth of interesting data on lost coins, hodling patterns and much more. There’s also a more serious side to company, however: its services include ‘reporting on your customers’ cryptocurrency-related activities” and detecting “suspicious activity and emerging threats from the dark web.’ Like all companies of their ilk, Chainalysis are in the pocket of law enforcement, who are their most valuable clients.”
Co-founder and chief operating officer Jonathan Levin says the company is focused on global regulation and how it will allow the crypto ecosystem to expand.
“Global regulation of the cryptocurrency industry is inevitable for this truly borderless financial system to achieve mainstream adoption.”
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