Chainalysis, a service exploring the Ethereum network, has opened a compliance tool ahead of the upcoming stricter requirements for digital asset transfers. So far, Chainalysis has been skilled at tracking ERC-20 tokens when moved from hacked accounts.
Token Transactions May Hide a Dark Past
Chainalysis will now offer specialized software for on-demand token analytics. Known as Chainalysis KYT (Know Your Transaction), the tool will help even digital assets to be compliant with the Financial Action Task Force (FATF) requirements, which are expected to come in full force next year.
You can also read more on the announcement and why we did it on our blog! https://t.co/IBOaplxbul
— Chainalysis (@chainalysis) October 3, 2019
The FATF set of requirements is an international document with recommendations, which for the first time attempts to target directly any cryptocurrency service provider, including wallet builders and exchanges. The requirements may move beyond tracking cash movements, and possibly into monitoring the size and origins of cryptocurrency and token transactions.
Until now, crypto-based transactions have not been tracked directly by financial authorities, except in unusual cases. But as more tokens are created and used for transfers of value, blockchain analysis is becoming important.
Jonathan Levin, Co-Founder and Chief Strategy Officer of Chainalysis, commented,
A robust compliance infrastructure is essential to underpin the growth of this rapidly expanding, global industry… By working closely with our customers and partners, we built a scalable platform that enables us to support more cryptocurrencies at a higher velocity.
The loss of tokens through hacks and exploits is also a source of tokens. But tracking those tokens to exchanges is a task that only a few startups have taken. The Ethereum network has grown to thousands of tokens and smart contracts, potentially presenting a challenge to track illegally acquired funds, tainted addresses, and other exploits.
Chainalysis Expands Asset Tracking
Chainalysis is managing tracking for 48 cryptocurrencies, which represent about 90% of exchange volumes. The tool plans to add 23 additional digital coins and tokens, including Dash (DASH) and ZCash (ZEC), as well as XRP, along with Dogecoin (DOGE) and Ethereum Classic (ETC). The option to screen the networks may make it possible for exchanges to offer DASH and ZEC without fears of legal repercussions.
The tool will also cover the XRP transfers on Ripple’s network, making it easier for exchanges to transparently reveal the asset’s activity.
“Chainalysis is the leader in blockchain analysis and compliance software,” said Ethan Beard, SVP of Xpring, Ripple’s developer platform. “We are thrilled to partner with them to further promote the compliant use of XRP by exchanges, wallets, and financial institutions globally.”
The Chainalysis tool arrived just as Binance also stepped up its AML procedure, hiring Coinfirm to improve oversight and automate the analysis of transactions and the origin of funds.
What do you think about ERC-20 token tracking? Share your thoughts in the comments section below!
Images via Shutterstock, Twitter @chainalysis