Blockchain data analytics firm Chainalysis has announced the accelerated launch of two primary sanction screening tools that it will provide to the cryptocurrency industry for free.
According to the report The screening tools, delivered by Chainalysis on March 10, include two main components of new tracking software that will help exchanges screen wallets and transactions for activities that appear to evade economic sanctions. The first tool, which is readily available, is an on-chain oracle†
An on-chain oracle is a smart contract that focuses more specifically on DeFi (decentralized finance) projects. It validates whether or not a cryptocurrency wallet address is included in a sanction designation. This means that all wallets included in economic sanctions lists provided by the US, EU and UN will automatically be available to anyone administering the oracle.
The second tool, to be released next month, is an Application Programming Interface (API). An API uses the exact same data as the on-chain oracle to validate a wallet’s sanctions list, but is designed for use in a much wider variety of applications, including centralized crypto exchanges and mobile user interfaces.
Speaking about the importance of transparency in cryptocurrency, Chainalysis co-founder and CEO Michael Gronager said in a statement:
“Now is the time for the industry to demonstrate that the inherent transparency of blockchains makes cryptocurrency a powerful deterrent to sanctions evasion.”
He added that Chainalysis has accelerated the development of its screening tools and would release them for free to anyone in the crypto industry.
“Pending continued sanctions, we have prioritized the development of these tools so that all participants in the cryptocurrency market have what they need to leverage this transparency and perform basic sanctions screening at no cost to them. “
Related: BNY Mellon Partners With Chainalysis To Track Users’ Crypto Transactions
Chainalysis continued to say it would pay more attention to monitoring and investigating transactions in the growing DeFi sector.
“Many decentralized protocols and platforms that have recently grown in popularity do not include tools that allow effective sanctions risk management.”
Currently, users of DeFi platforms can operate with more anonymity than centralized exchanges, which generally have stricter identity verification protocols such as KYC.
US-based cryptocurrency platform, Coinbase has further supported the idea that the inherent transparency and public nature of cryptocurrencies can actually help governments enforce sanctions.
While traditional fiat currencies allow bad actors to use shell companies, tax havens and opaque ownership structures to “obscure the movement of funds”, crypto assets are fundamentally public and traceable, helping the government to “detect and deter evasion additions.” scare,” Coinbase chief legal officer Paul Grewal said in a blog post earlier this week.