Chainalysis, a blockchain-data analysis company, has announced the rapid launch of two primary “sanctions screening” tools it will offer free to the cryptocurrency market.
Chainalysis’ March 10 report states that the new screening tools consist of two components of new tracking software. These will help exchanges screen transactions and wallets for suspicious activity. On-chain oracle is the first tool that is available immediately.
An on-chain Oracle is a smart contract that targets DeFi (decentralized financial infrastructure) projects. It verifies whether or not a cryptocurrency address has been added to a sanction list. This means that any person running the oracle will have access to all wallets on the economic sanctions lists of the US, EU, and UN.
A programming interface (API) is the second tool that will be released next month. An API uses exactly the same data as an on-chain Oracle to verify whether a wallet is on any sanction list. However, it can be used on a wider range of applications including mobile user interfaces and centralized crypto exchanges.
Michael Gronager, Chainalysis CEO and co-founder, spoke out about the importance of transparency when it comes to cryptocurrency.
“Now is the right time for the industry’s to show that cryptocurrency’s inherent transparency makes it a powerful deterrent against sanctions evasion.”
He said that Chainalysis had accelerated the development and would release its screening tools to everyone in the crypto industry for free.
“In anticipation of continuing sanctions, we have prioritized the development these tools in order to ensure that all cryptocurrency market participants have everything they need to harness transparency and perform basic sanctions screening at no charge.”
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Chainalysis stated that it would continue to pay more attention to monitoring and scrutinizing transactions within the DeFi sector.
“Many of the decentralized platforms and protocols that have gained popularity in recent years do not include tools that allow for the effective management or sanctions risk.”
DeFi platform users can now operate anonymously than central exchanges. Central exchanges tend to have stricter identity verification protocols such as KYC.
Coinbase, a US-based cryptocurrency platform has supported the notion that cryptocurrencies’ transparency and public nature can help governments enforce sanctions.
In contrast to traditional fiat currencies, where bad actors can use tax havens and shell companies to conceal the movement of funds, crypto assets are public and traceable. Paul Grewal, Coinbase chief legal officer, said this in a blog post.