Our Crypto Fanar newsletter went out: link
This week again, the main news have been related to blockchain surveillance and analytics due to major evolutions in the Coinbase case that rose the issue of how to adopt an efficient and compliant KYC and AML strategy without sacrificing our ethics. Similarly, investigations on the QuadrigaCX scandal and Circle’s new market surveillance tool suggest that there is room for progress in exchange professionalism and regulation.
These developments don’t shy away retail and institutional investors: new crypto-based ETFs and ETP have emerged while the technology behind cryptocurrencies and their supports is progressing. Online payment with cryptos are also rising.
Coinbase’s Neutrino Gate – The case for ethical yet effective blockchain analytics
In the context of QuadrigaCX’s case and the acquisition of controversial blockchain intelligence firm Neutrino by major cryptocurrency exchange Coinbase, the lights have been shed on blockchain analytics and on the way exchanges implement their KYC and AML policies.
It has never been as obvious that:
– Exchanges, major investors and financial institutions dealing with digital currencies desperately NEED to resort to blockchain intelligence services to investigate their partners or clients or track suspicious activities;
– such services can be controversial.
In this new market, a handful of companies have developed solutions that enable them to provide efficient blockchain forensics services and the competition is ruthless even though the demand is booming. Part of those have clearly decided to let down ethics while others that have more expensive but less efficient products try to compensate by communicating their concerns about their competitor’s practices.
A few lessons can be drawn:
– It is common that blockchain analytics companies such as Chainalysis, Elliptic or CSI sell an access to pseudonymous user data in order to investigate suspicious on-chain activities.
– The crypto industry is more and more in need for such services but is under the spotlight regarding cases of fraudulent customer personal data divulgations.
– Most firms that adopt ruthless strategies to sell illicit data to their clients will get caught, while the others need to constantly pay attention to the way they market and communicate about their services.
– Most digital currency exchanges, governments and financial institutions will ask for greater integrityfrom their analytics providers.