Governments around the world are taking pressure from investors and financial institutions to provide clear cut regulations for digital assets. But the most common pushback from regulators in the uncertain security issues of digital assets and the exchanges that operate them. Because of this, traditional investment companies are partnering with experts from the cryptocurrency industry to combine their money handling licensing along with traditional KYC and AML requirements to propose improved and more transparent cryptocurrency investment processes.
However, this still isn’t enough for many countries and many retail investors are still weary of the new financial instruments. This has lead to a huge increase in blockchain technology companies that focus entirely on ways to ensure the safety and origins of cryptocurrencies. Last week Coinbase acquired a blockchain analytics startup called startup Neutrino, citing the importance of analytics-based compliance “as we work with regulators and agencies in different countries to bring new assets there,” the exchange said at the time.
A cryptocurrency surveillance startup led by former Goldman Sachs fintech engineers raised $3 million in seed funding recently. while Chainalysis, also a cryptocurrency sleuthing startup, announced a $30 million Series B earlier this month. The company developed a machine learning and artificial intelligence-powered trade surveillance platform for digital assets. Funding was led by Hanaco Ventures with additions from Global Founders Capital and Wall Street veterans David Krell and Norman Sorensen.
“Although it might sound cliched, the digital asset ecosystem is in dire need of good ‘picks and shovels’ rather than more end applications. We believe regulation and security are the ultimate ‘enablers’ in this space, and that regulating a market powered by groundbreaking technology requires groundbreaking compliance infrastructure.” - Lior Prosor, general partner at Hanaco Ventures
The company plans to use the investment to expand the firm’s expertise in engineering and machine learning, as well as pushing marketing and customer service teams to increase sales. They note that cryptocurrency exchanges are largely using “outdated” trading surveillance platforms that work well with fiat currency, but are not well suited to the world of digital assets.
Another blockchain and cryptocurrency security firm called CipherTrace raised $15 million in funding from investors led by Aspect Ventures with input form Mike Novogratz’s Galaxy Digital, Neotribe Ventures and WestWave Capital. The startup provides analytics and forensics products for cryptocurrencies and blockchains. They claim their systems are already in use by some government, regulators, law enforcement and auditors to help enforce anti-money laundering laws and tackle crime.
“Appropriate AML technology is critical for the mainstream adoption of digital assets. Institutional investors are increasingly looking to platforms like CipherTrace to monitor the integrity of transactions with their counterparties.” - Greg Wasserman, co-head of principal investments at Galaxy Digital
By: BGN Editorial Staff