Chainalysis Doubling Down in London
One of the first moves they will make with the cash injection is to double their employees in London. Accel's London-based Phillippe Botteri gains a board seat at Chainalysis as a result.
The city is optimal for its proximity to top universities that increasingly recognize cryptocurrency as a technology poised to reshape the way people exchange value across the world. The office will position us to work with the major financial institutions and cryptocurrency businesses based in that market, as well as European governments.
Chainalysis is one of the biggest contractors with the IRS. As CCN reported last year, they received the bulk of the money the IRS spent tracking crypto payments – more than $5 million.
The raise is almost twice their Series A, and the company says it has significantly improved its operations since then. Last year, they launched their “Know Your Transaction” software. The anti-money laundering suite allows an exchange or other participant in the crypto economy to enter in a transaction ID and determine how “clean” it is.
As Tracking Companies Grow, Privacy Coins Gain Momentum
In this reporter’s experience, the very mention of “Chainalsyis” is enough to get cryptonaughts barking. Among the crypto-anarchist set, the company is unpopular. Financial privacy, a core tenet of crypto-anarchist thought, best manifests in privacy coins like Monero.
The old arguments about privacy come back. “If you have nothing to hide, what are you worried about?” The crypto-anarchist rolls their eyes.
However, another argument exists. Without companies like Chainalysis in the game, the government would continue to pose an existential threat to crypto as a whole.
Still, the traceability of cryptocurrency is far greater than that of traditional fiat cash. Important minds in the crypto space have identified this as a weakness. Litecoin's going to have shielded transactions, according to creator Charlie Lee.
Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy.
I am now focused on making Litecoin more fungible by adding Confidential Transactions. 🚀
— Charlie Lee [LTC⚡] (@SatoshiLite) January 28, 2019
After all, if a drug dealer comes into your gas station and buys a pack of cigarettes, the bank doesn’t scan the bills used and reject them from your deposit. Cryptocurrencies lose fungibility with “dirty coins.”
Financial Privacy Is A Requirement of Financial Freedom
Community-based solutions such as “coin mixing” have long existed.
Still, some in the crypto economy will have problems with the basics of Chainalysis’ mission. “Evasion of sanctions” is not seen as a problem for those who believe in true economic freedom.
"Our core objective is to organize the world’s blockchain data and make it accessible and useful to governments, financial institutions, and cryptocurrency businesses. We are doubling down on our investment in our people and technology that builds our understanding of how and why people use cryptocurrencies. Specifically, we are building a team that is focused on attributing more services associated with criminal activity, including darknet markets, scams, ransomware, terrorist financing, and sanctions evasion."
Chainalysis, founded in 2015, are no longer the only company in the transactions analysis game. Elementus is another firm which works to provide as much information about blockchain data as possible. To date, they have used their powers for good, identifying that the Cryptopia hackers had stolen far more than reported. Later, they were the first to note that the Cryptopia hackers were back at it.
The crypto world is rapidly changing. Dark Net Markets like the Silk Road were arguably the first services to give real value to cryptocurrency. But they benefited largely from a sort of first-mover advantage. These days you can rest assured your friendly local government thug knows what Bitcoin is and, in many ways, you’re better off conducting any form of illegal transaction offline, in cash.