Bitcoin is, in the public perception, a traditional form of finance that eludes governments and law enforcement all over the world. Media outlets tend to call the digital currency “impossible to trace”, even though all transactions are publicly listed on the blockchain in real-time. To further solidify that statement, Chainalysis decided to come up with a business model that further prevents money laundering attempts in the Bitcoin world. Europol has taken notice of this startup, and enlisted the company’s services.

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Preventing Digital Currency Money Laundering

Even though it is rather easy to trace Bitcoin transactions on the blockchain in real-time, there is no direct way of figuring out the identities behind these wallet addresses. Bitcoin does not transmit personal details when sending or receiving money around the world, which can be an issue regarding money laundering attempts.

Companies active in the digital currency space have taken notice of this potential problem, and startups such as Chainalysis specialize in countering money laundering and fraud in the world of digital currency. It is important to keep in mind fraud in the Bitcoin space has nothing to do with chargebacks, but rather with hackers trying to double spend funds, or using money from a stolen account to pay for goods and services.

Digital currencies should never become the tool of preference for criminals, although those behind popular ransomware solutions prefer Bitcoin over any other payment method. Up until this point, there is no clear way for law enforcement to resolve the identity of Bitcoin users. Keeping in mind how money laundering is a preferred method of transferring funds around the world for [online] criminals, issues like these need to be addressed.

Chainalysis operates in a very simple yet powerful way, as they track digital identities linked to digital currencies. Their in-house developed software solution flags any suspicious activity associated with any digital currency address, and provides law enforcement with a range of investigative tools. This makes Chainalysis an invaluable partner for agencies such as Europol.

It comes as no surprise to find out Europol’s European Cybercrime Center has agreed to a partnership with Chainalysis. This announcement comes at a time in which digital currencies are gaining a lot of momentum, and this partnership will help bring more legitimacy to Bitcoin and other alternative forms of finance.

Cyber crime is a serious threat to citizens and companies all over the world. Due to the evolution of technology, hackers get more creative regarding attack vectors against individual users and companies. In a lot of cases, Bitcoin is being used as a payment method for ransom or extortion fees. Chainalysis and Europol want to put this matter to bed, and collaboration between Bitcoin startups and law enforcement will be very beneficial to the digital currency ecosystem.

Chainalysis Raises US$1.6m In Funding

Europol is not the only one taking notice of the business model offered by Chainalysis. Coming up with proper tools to fight potential money laundering in the Bitcoin world is much needed, and will help silence some of the digital currency’s biggest critics. But developing such a powerful and potent solution requires a lot of money.

Luckily for Chainalysis, they recently closed a US$1.6m funding round, led by Point Nine Capital. Other investors were Digital Currency Group, Converge Venture Partners, Techstars, and FundersClub. What is of particular interest is how all of these companies are active in the Bitcoin world, other than Berlin-based Point Nine Capital. .

Source: Reuters