Chainalysis Research: Speculation Remains Bitcoin’s Primary Use Case

As part of its dataset, Chainalysis reportedly monitors crypto payment service providers such as BitPay, which reportedly processed $1 billion for …

Research from United States-based blockchain intelligence firm Chainalysis indicates that only 1.3% of economic transactions for bitcoin (BTC) came from merchants in the first four months of 2019. The news was reported by Bloomberg on May 31.

The low figure is ostensibly symptomatic of a speculative trend that Bloomberg suggests is preventing the cryptocurrency from being adopted for payments: as bitcoin continues to see significant volatility and renewed valuation gains, its nature as a speculative asset purportely disincentivizes users from using it as a unit for spending.

Accumulation — or HODLing, as the industry acronym goes — thus appears to be in direct conflict with the cryptocurrency’s future as a replacement for fiat currencies. In an email to Bloomberg, Kim Grauer, a senior economist at the firm, proposed that:

“Bitcoin economic activity continues to be dominated by exchange trading. This suggests Bitcoin’s top use case remains speculative, and the mainstream use of Bitcoin for everyday purchases is not yet a reality.”

Bitcoin Activity by Category

As part of its dataset, Chainalysis reportedly monitors crypto payment service providers such as BitPay, which reportedly processed $1 billion for merchant in both 2017 and 2018.

Chainalysis’ data shows that merchant activity for bitcoin peaks during a crypto market bull run — as in late 2017, when merchant services hit a high of 1.5% of total bitcoin activity, before dropping to 0.9% in 2018 during the bear market and then rising again during this year’s recovery. BitPay CCO Sonny Singh told Bloomberg the firm had observed the same trend.

Between January and April of this year, exchange-related transactions nonetheless continued to account for 89.7% of all bitcoin activity — down just a fraction from 91.9% for the whole of 2018, Chainalysis’ data indicates.

This month, major U.S.-based cryptocurrency exchangeCoinbaseannounced that Coinbase Commerce — its crypto payment processor for merchants — would begin supporting Circle’sstablecoin USD Coin (USDC).

Related Posts:

  • No Related Posts

Japan’s Biggest Bank Invests in Crypto Investigation Startup Chainalysis

In April 2018, Chainalysis raised $16 million in Series A investment from Benchmark Capital, and launched a cryptocurrency compliance tool, called …

Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank, has backed an additional $6 million Series B round for cryptocurrency sleuthing startup Chainalysis.

The investment came via the bank’s venture capital unit, MUFG Innovation Partners, Chainalysis said Tuesday. The round also saw participation from Tokyo-based investment firm Sozo Ventures.

The additional funding means Chainalysis’ total for its Series B round now sits at $36 million. It raised $30 million back in February, in an initial round led by venture capital firm Accel Partners.

With the additional investment, Chainalysis said it aims to expand its Asia-Pacific business and open a new office to assist that effort.

The startup said it has already significantly grown its business in the region, claiming to have more than doubled client numbers and increased contracted revenue by “more than 16x” last year.

“Chainalysis plans to build on this momentum with a physical presence and deeper engagements with entities including Sozo and MUFG, who will provide critical market insights,” the firm said.

In April 2018, Chainalysis raised $16 million in Series A investment from Benchmark Capital, and launched a cryptocurrency compliance tool, called Chainalysis KYT (for “know your transaction”), which it says provides transaction analysis in real time.

MUFG Innovation Partners CEO and president, Nobutake Suzuki, said in yesterday’s announcement:

“Chainalysis’s compliance technology is important to providing the insight and anti-money laundering controls banks need in order to establish next generation compliance frameworks.”

Founded in 2014, Chainalysis notably helped investigations in the Mt. Gox bankruptcy case, in the attempt to locate the collapsed exchange’s missing bitcoin.

Last week, the startup published a public comment letter in response to a draft recommendation by the Financial Action Task Force (FATF), saying that it is unrealistic and harmful for the crypto industry to expect exchanges to send know-your-customer (KYC) information to recipient platforms with every transaction.

MUFG image via Shutterstock

Related Posts:

  • No Related Posts

Blockchain Forensics Firm Chainalysis Clarifies Data Use in Wake of Coinbase/ Neutrino …

Coinbase says it hired Neutrino to up its KYC/AML (anti-money laundering/terrorist finance) game as it handles increasing volumes of cryptocurrency …

Blockchain forensics firm Chainalysis has blogged to address possible concerns that its services could be being used to violate crypto users’ privacy.

The company’s statement comes after controversy erupted last week when it was revealed that Coinbase, a large American crypto trading platform, had acquired Italian digital-forensics firm Neutrino.

Coinbase says it hired Neutrino to up its KYC/AML (anti-money laundering/terrorist finance) game as it handles increasing volumes of cryptocurrency transactions.

A division of Neutrino called “Hacking Team,” however, has been arousing the ire of digital privacy advocates and concerned individuals for years for helping law enforcement agencies, including arms of repressive regimes, to monitor suspected criminals and dissidents.

Motherboardreported in 2015 that the American Drug Enforcement Agency (DEA) has been using Hacking Team “Remote Control System (RCS)” software to secretly monitor phones, texts, Skype calls and social media of targeted individuals since 2012.

Hacking Team tech has also reportedly been used by state agencies to collect passwords and activate webcams and microphones on devices without users’ knowledge- and not necessarily with warrants in place.

A #DeleteCoinbase campaign erupted on social media last week when Coinbase’s acquisition of Neutrino was announced.

Coinbase responded this week by stating that it had failed in its due diligence process when it acquired Neutrino based on the company’s technical prowess alone.

Coinbase also promised to fire all Neutrino staff with a history of working for Hacking Team, whether they still work there or not.

Now Chainalysis, which also boasts numerous law enforcement clients, is attempting to get ahead of the storm by explaining how its business is focussed.

The company begins the post by explaining current levels of transparency on blockchains like Bitcoin:

“Blockchains make cryptocurrency transaction data public and permanently available. They record when a transaction happened, the amounts transacted, and which addresses were involved. However, they do not contain information about the real-world service behind a transaction.”

The company says that it mainly provides assistance with and enhances anti-money laundering compliance at companies handling crypto trades:

“…Cryptocurrency businesses and financial institutions need more context beyond just transaction amounts to comply with anti-money laundering (AML) regulations. These regulations require them to identify and report user activity that is indicative of money laundering…We put cryptocurrency transaction data incontext for our customers by labeling addresses with the real-world entities that control them.”

The post does not mention the company’s involvement with law enforcement agencies.

Without an automated system of identifying crypto transaction origins, data must be sifted by humans, an impossible task given transaction volumes, says Chainalysis.

Chainalysis software essentially “decodes” crypto address alphanumeric strings and attributes them to “real time entities” of whatever legitimacy.

The company gives the example of two long alphanumeric address strings translated as “sent from BTC-e (trading platform) to Silk Road (dark market).”

The company is careful to point out that it, “identif(ies) services and (does) not label individual users’ wallets.”

Any such linking must be done by an entity employing Chainalysis software, says the company:

“Any link from a transaction back to the person or people involved in that transaction must be made outside of Chainalysis because we do not collect any personally identifiable information from exchanges.”

The company admits that it does, “flag…transactions based on indicators of risky behavior. For example, we will flag a transaction if we identify the counterparty as an illicit service, such as a darknet market or terrorist financing organization.”

Chainalysis ends the post by placing itself on the legitimate-use side of crypto:

“Ultimately, compliance and investigations solutions like ours build trust in cryptocurrency as a safe way to move value across the world.”

Avowedly libertarian Bitcoin (cash) news site Bitcoin.com recently published an article called “Forensic Analysis of Blockchain Surveillance” companies in which the author stated that Chainalysis, “are in the pocket of law enforcement…their most valuable clients.”

The author also claimed that:

“Chainalysis’ ‘Know Your Transaction, software, while purportedly designed to thwart money laundering, has a wealth of applications, most of which have little to do with stopping serious crime. In libertarian cryptocurrency circles, Chainalysis is a very dirty word.”

Related Posts:

  • No Related Posts

Chainalysis CEO Quiets The Crypto Crowd With Latest Tether (USDT) Blockchain Audit Feedback

Stablecoins are virtual currencies that have a value that does not fluctuate as much as other cryptocurrencies. One of the most popular ways to do it is …
Chainalysis-CEO-Quiets-the-Crypto-Crowd-with-Latest-Tether-USDT-Blockchain-Audit-Feedback

Chainalysis CEO Praises Tether’s Transparency And Raises $30 Million

The blockchain analysis startup Chainalysis raised $30 million during a Series B funding round. In a recent interview with Fortune, the CEO of the company, Michael Gronager, talked about the importance of stablecoins in the virtual currency industry.

Stablecoins are virtual currencies that have a value that does not fluctuate as much as other cryptocurrencies. One of the most popular ways to do it is by pegging it to a specific fiat currency such as the US dollar or Euro.

The most known and largest stablecoin in the market is Tether (USDT). However, this digital asset has been placed under scrutiny several times due to the way in which they handled their dollar reserves or how the coin was used to ‘manipulate’ Bitcoin’s price.

Back in April 2018, the company raised $16 million in a Series A funding round. The company was able to create software that is able to monitor Bitcoin transactions. At the same time, they have added support for other virtual currencies. However, there are some coins such as Monero (XMR) or ZCash (ZEC) that have enhanced privacy and cannot be tracked.

The product that they have created helps more than 100 financial institutions and cryptocurrency exchanges. WIth the funds gathered, they will be able to open a London office for Research and Development. Additionally, Philippe Botteri, a partner at Accel, will be joining the company’s board of directors. The intention is to also help clients vet transactions related to stablecoins.

Gronager explained that stablecoins became a source of momentum for the crypto industry. During the last year, virtual currencies have fallen from their all-time highs more than 80% or 90% in some cases.

Gronager commented about it:

“Born out of the ashes of this was the stablecoin as another way to easily and safely create tokens. This ability to trade U.S. dollars against crypto is very powerful.”

The CEO of Chainalysis said that they have confidence in the most popular stablecoin in the world. He mentioned that Tether has a “quite good” transparency and that there are no signs that could raise alarms about it.

According to the company, there is more than 4 million Bitcoin lost forever. That means that Bitcoin’s real supply is currently 17 million BTC around 20% less than is real potential supply.

There are many other stablecoins in the market, not only Tether. One of them is the USD Coin (USDC) that was launched by Circle with the intention to provide a new solution for traders and individuals that want to protect their investments against the volatility of virtual currencies.

Other stablecoins are Paxos Standard (PAX), TrueUSD (TUSD) or Gemini USD (GUSD).

Bitcoin (BTC), Ethereum (ETH), XRP (Ripple), and BCH Price Analysis Watch (Feb 13th)

Cryptocurrency compliance company Chainalysis secures $30M Series B

Chainalysis, a provider of cryptocurrency compliance and investigation solutions, announced today it has secured a $30M Series B financing led by …

Chainalysis, a provider of cryptocurrency compliance and investigation solutions, announced today it has secured a $30M Series B financing led by Accel. Benchmark also increased its investment in the company after leading its $16M Series A round last April. Chainalysis will use the funding to support strategic product development of new cryptocurrency usage and open an office in London that will act as a hub for its research and development lab and regional expansion. Accel’s investment was led by Amit Kumar and Philippe Botteri. Botteri will represent Accel on Chainalysis’s board of directors.

Over the past year, the company has launched and deployed its real-time anti-money laundering and compliance software for cryptocurrencies, Chainalysis KYT (Know Your Transaction), and expanded its coverage beyond Bitcoin to include Ethereum, Litecoin, Bitcoin Cash, and stablecoins. Over 100 financial institutions and cryptocurrency exchanges, including Binance, the world’s largest cryptocurrency exchange, have signed up for Chainalysis KYT to automate the process of screening transactions and monitoring user activity.

“While other companies in our industry are pulling back, Chainalysis is investing in building foundational technology for the future of cryptocurrency,” said Michael Gronager, CEO and Co-founder of Chainalysis. “We are focused on empowering new cryptocurrency use cases like stablecoins and supporting businesses and governments globally as cryptocurrency regulation becomes more defined.”

“Thanks to its deep crypto expertise and unique technology, Chainalysis has quickly become the industry benchmark for blockchain analysis and compliance technology,” said Botteri, partner at Accel and based in London. “Chainalysis’s vision is to make cryptocurrency compliance a new standard for financial services as the ecosystem matures. We look forward to supporting them across Europe, the U.S., and Asia,” added Amit Kumar, partner at Accel and based in Palo Alto.

The latest round of funding comes on the heels of Chainalysis’s annual report on crypto crime and launch of KYT for stablecoins– pegged cryptocurrencies designed to decrease volatility and appeal to a broader audience of users– that now have a total market cap of over $3B. With this solution, firms launching stablecoins will be equipped to monitor every transaction throughout their lifecycle, from issuance to redemption. Initial named clients within stablecoins include Paxos and TrustToken.

“Chainalysis has seen significant traction over the past year, and we believe there is a steep growth trajectory ahead,” said Sarah Tavel, General Partner at Benchmark and member of Chainalysis’s Board of Directors. “We are doubling down on our conviction that the firm’s technology will build trust in the ecosystem and encourage greater participation in cryptocurrency markets.”