For many years, Bitcoin and other cryptocurrency projects have gotten a bad reputation among mainstream audiences and also in the eyes of regulators and authorities. Bitcoin has been frequently associated with cybercrime and terrorism finance, although data has often suggested that the U.S. dollar is much more prevalent in these activities.
Bitcoin’s pseudonymous nature and prevalent use in deep web markets like the infamous Silk Road have been highly detrimental to its reputation. While Bitcoin is indeed widely used throughout deep web dark markets and in malicious software like ransomware, data shows that its use in cybercrime has been decreasing steadily.
Chainalysis continues to make strides towards industry maturity
While Bitcoin is still associated with privacy-centric finance, blockchain forensics and the inception of other privacy-focused cryptocurrencies like Monero and Zcash have led to its decreased use in these nefarious activities. A prime example of this is the recent collaboration between Crypto.com (CRO) and popular blockchain forensics company, Chainalysis.
On March 25, 2021 Crypto.org announced the release of its Crypto.org native blockchain. Now the company is partnering with Chainalysis to increase security of the Crypto.org network. The partnership will allow Chainalysis to support the integration of the CRO token on Crypto.org Chain, providing real-time and on-chain monitoring solutions.
How does it all work?
The aforementioned integration will be done through Chainalysis compliance and risk management software which is designed to monitor and investigate cybercriminal activity on blockchains. While Chainalysis has already partnered with other cryptocurrency-related venues, it is now taking this a step further to provide Crypto.org with its innovative Chainalysis KYT (Know Your Transaction) software and the Chainalysis Reactor, the investigations software.
This KYT software combines blockchain intelligence which can be interacted with a friendly graphic user interface, and a real-time API to reduce manual compliance workflows, and the Chainalysis Reactor will support digital forensics, audit practices, and compliance controls across Crypto.org Chain.
How Blockchain forensics is changing the landscape
The pseudonymous nature of Bitcoin and full anonymity provided by coins like Zcash, Monero, Komodo and many others has led to several regulatory crackdowns and many more may soon follow. This has even led to popular exchanges like Bittrex to delist privacy coins like the aforementioned three coins.
Moreover, previous situations like global exit and Ponzi scams and cryptocurrency exchange hacks have led to users losing millions in funds. Although some have been able to recover them, most are forever lost and in the hands of criminals which can even lead to undesired volatility for some cryptoassets..
While exchanges employ know your customer (KYC) and anti-money laundry (AML) policies which can, in theory, stop hackers from withdrawing or exchanging these funds, these are often not enough to do so. Moreover there are also other methods like peer-to-peer exchanges and Bitcoin ATMs, which may allow for anonymous withdrawals.
These has led cryptocurrency projects and venues to come up with solutions like the aforementioned partnership between Crypto.org and Chainalysis and other partnerships like the one between Huobi and Chainalysis and Paxful and Chainalysis. Exchanges like Huobi have also developed their own forensics and monitoring tools like the Star Atlas tool.
The road ahead
Companies like Chainalysis and CipherTrace also cooperate frequently with authorities to further improve monitoring and prevention of cybercrime and money laundering which has led Bitcoin to become viewed in a more positive light and gain worldwide acceptance both in the retail and industrial worlds.
One thing is certain, the blockchain industry is here to stay and regulators know this. Companies like Chainalysis, Crypto.org, CryptoCompare and others are working hard to make this happen.
Featured image via Pixabay.