Importance of compliance in the crypto market has been increasingly recognized
ConsenSys Inc., which is trying to become a full-service software provider for the Ethereum network, is launching an automated service to catch “crypto crooks”.
Led by one of the co-founders of Ethereum, Joseph Lubin, the New York-based company is launching a product focused on KYC (meet your customer) regulatory compliance requirements that have proven to be a headache for many cryptocurrency companies.
“More and more people are building decentralized apps that need it like a Lego piece,” said Lex Sokolin, executive at ConsenSys in London. “What we are trying to do is make the activity in the decentralized financial infrastructure much more secure, transparent and much easier to track.”
With traditional payments, banks and companies like Visa Inc. keep an eye out for activities like money laundering. In cryptocurrencies, KYC’s policies have been varied and precise – a problem mainly because authorities are increasingly investigating.
Many cryptocurrency exchanges have engaged third-party analytics and compliance providers, such as Chainalysis Inc. and CipherTrace Inc., to help them determine whether a particular client and batch of currencies may be related to hacks or criminal activity.
ConsenSys is entering the crowded compliance market hoping that its exclusive focus on just one digital currency payment network – Ethereum, where most tokens are issued – will help. ETH, the second largest cryptocurrency after Bitcoin, is the “native” currency of the decentralized platform.
ConsenSys will be able to analyze transactions related to more than 280,000 currencies issued on Ethereum. He will focus on exchanges and so-called decentralized financial companies, which allow loans and other financial functions, using automated software that has become known as smart contracts.
There has been an explosion in these DeFi services in recent months, and the emerging industry’s user base has grown to 200,000 recently, up from 20,000 last year, said Sokolin.