Cryptocurrencies tend to attract a lot of attention from criminals. This is primarily due to their perceived anonymity and privacy aspects. Several blockchain analysis companies specialize in ensuring such criminal activity cannot take place. Chainalysis has now confirmed they are launching a similar service for stablecoins. A remarkable development, although one that also makes a fair bit of sense.
Blockchain Analysis for Stablecoins
On the surface, stablecoins should never be of great interest to criminals. They are merely designed to represent digital US Dollars. However, they can be traded against most of the top cryptocurrencies, which does make them somewhat appealing. To combat any nefarious activity involving stablecoins, Chainalysis has launched a new service. It will serve as the Know Your Transaction tool for digitized US Dollars.
In launching this service, Chainalysis wants to keep tabs on stablecoins through their entire lifecycle. This tool will also track the creation and issuance of said tokens from now on. It is the first time a blockchain analysis tool is used for stablecoin-related purposes. Only time will tell if there is a genuine need for offerings such as these. It makes sense on paper, as stablecoins can be traded like cryptocurrencies on various trading platforms.
Chainalysis COO Jonathan Levin adds:
“Chainalysis exists to build trust in cryptocurrencies among institutions and users. The repeated knock against cryptocurrency is its volatility, and trust in stablecoins could lead the way to increased commercial use. Chainalysis KYT for stablecoins further supports this vision by raising the bar for accountability and providing compliance teams with the technology they need to meet AML requirements.”
To this day, it still remains somewhat troublesome for cryptocurrency firms to enforce AML controls. This is also part of the reason so few banks want to work together with these companies at this time. Solving that problem needs to happen one step at a time. The help of Chainalysis can prove to be crucial in this regard. Exchanges will be able to monitor high volume transactions and identify potential risks along the way.
Although stablecoins are created for the sole purpose of acting as a stable digital currency, they are also pseudonymous like Bitcoin and consorts. As such, this new development is also beneficial to the issues of such digital tokens. It helps these companies strengthen their existing banking relationships and perform the necessarily AML checks. Being transparent with customers is a top priority for companies like Paxos, Tether, et cetera.
For the time being, this new solution primarily focuses on ERC-20 stablecoins. This means Tether’s USDT will not be part of this solution, as it is created on the OMNI chain. Chainalysis has confirmed it will introduce support for extra tokens over the next few months. Developments like these pave the way for a more robust ecosystem as a whole. Any positive development is considered to be a big victory.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency.