The blockchain intelligence firm says the services are specifically designed to help decentralized exchanges, DeFi platforms, DAOs and DApp developers.
Chainalysis has launched two new tools to help the crypto industry screen for sanctioned individuals and entities.
The blockchain intelligence firm says the services will be free of charge — and specifically designed to help decentralized exchanges, DeFi platforms, DAOs and DApp developers.
According to the company, an on-chain oracle has launched that will enable users "to easily validate they are not interacting with cryptocurrency wallets associated with sanctioned entities" — and an API will follow later this month.
Centralized platforms, which perform Know Your Customer checks, have a bit of an advantage here given how they can confirm the identity of each user before they start transacting. Chainalysis said:
"Given the transparency of blockchains, it would be difficult for the Russian government or financial elite to systematically evade sanctions at scale through cryptocurrency without detection. However, as with the traditional financial system, some sanctioned Russian actors may attempt to use cryptocurrency as a means to evade sanctions."
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A 'Priority' for Chainalysis
Announcing the new tools, Chainalysis CEO and co-founder Michael Gronager expressed hope that this will allow the industry "to demonstrate that blockchains' inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion."
Indeed, this comes at a pretty crucial time for digital assets — not least because the sector is coming under the spotlight after Joe Biden signed an executive order that tasks government agencies to come up with a regulatory strategy. Gronager added:
"In anticipation of ongoing sanctions, we've prioritized the development of these tools so that all cryptocurrency market participants have what they need to harness this transparency and conduct basic sanctions screening at no cost to them."
While the decentralized finance sector does pride itself on offering a higher degree of anonymity than centralized rivals, business risks can still emerge if tainted crypto runs through its systems. Paymagic founder Corbin Page explained:
"Until now, we haven't been able to find an easy way to monitor sanctions risk. There were no data sources. Chainalysis' tools will give us the information we need and peace of mind to focus on building our products while preventing exposure to sanctioned entities. This is more important than ever in today's Web3 world."
The new tools will allow businesses in the crypto sector to cross-check an address against a sanctions list before a transaction is made — with data coming from the US, EU and UN. Chainalysis' oracle is described as "a smart contract that can be called from other smart contracts to validate a wallet before allowing an interaction with the second contract."