Binance, the world’s largest cryptocurrency exchanges by traded value, today announced a partnership with Chainalysis, a New York-based provider of compliance software for real-time monitoring of cryptocurrencies transactions.
The self-described “leading provider of AML software for Bitcoin” allows cryptocurrency exchanges to distinguish suspicious patterns in real time and obtain law enforcement information. The company’s offering also includes a KYC solution, dubbed Chainalysis KYT (“Know Your Transaction”).
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Chainalysis’ compliance software can help both crypto firms and law enforcement agencies detect suspicious activity in order to battle any related criminal activity. It uses pattern recognition, algorithms and millions of open source references to “identify and categorize thousands of cryptocurrency services to raise live alerts on transactions involved in suspicious activity,” the company says.
The partnership with Binance coincides with company receiving $16m in Series A funding. Chainalysis has a few rivals in the market whose solutions strive to prevent, detect and investigate cryptocurrency money laundering, fraud, and compliance violations. The biggest competitor, though, is the UKK-based Elliptic which offers a proprietary compliance and fraud detection technology.
Global concerns but with absence of coherent direction
The concerns over cryptocurrency mining, trading, and usage to transfer money are already shared by several governments across the globe.
Of note, the cryptocurrency industry has recently seen several hires from mainstream finance firms in order to respond to the recent calls to regulate the nascent business, which are gathering steam with several regulators now require the operators of such venues to perform the same level of client due diligence as banks do.
Extending AML regulations to cryptocurrency activities is being considered in several countries around the world such as Australia and the UK, and already tracks the EU’s recent push to regulate Bitcoin. Poland also said it would strengthen its laws by bringing Bitcoin providers under the government’s anti-money laundering and counter-terrorism financial legislation.
But the really big challenge is the absence of coherent direction on cryptocurrency regulation as each country has its own approach. Some countries are welcoming, including Japan, while others are cautious, such as the US and Europe. And some nations like China are downright antagonistic.
Commenting on the news, Wei Zhou, CFO at Binance, said: “By working with Chainalysis, we are able to continue building a foundational compliance program that enables the next phase of our growth. Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve.”
“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users. We expect many to follow Binance’s lead to build world-class AML compliance programs to satisfy regulators globally and build trust with major financial institutions,” added Jonathan Levin, Co-Founder, and COO of Chainalysis.
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