Chainalysis is one of the leading companies when it comes to big data and monitoring in the blockchain space. The American company works with government and law enforcement agencies around the world. She hunts down money launderers and cryptocurrency scammers. Recently, it also ensures that sanctioned people from Russia do not run away from their cryptocurrency assets.
How does it all work? What do you learn about the crypto space? A conversation with CEO Kim Grauer on the fight against scams, the sanctions debate, and the growing conflict between security and privacy in the blockchain world.
For what purpose did you found Chainalysis in 2014?
In February 2014, the world’s largest cryptocurrency exchange was hacked. Mount Gox. 850,000 bitcoins were stolen. The loss bankrupted the giant.
Our founder, Michael Gronager, was the COO of the popular cryptocurrency exchange at the time. octopuses. She spoke to regulators around the world. They couldn’t monitor transactions and they couldn’t investigate crimes.
For this, he developed the Chainalysis software. And even solved the Mt.Gox case. We were able to determine: private keys of the Mt. Gox wallets had been stolen years before the attack. Since then, Bitcoin has continuously flowed, which was then quickly repaid. Russian Alexander Vinnik used the stolen bitcoins to launder millions of dollars. As a result of our investigations, he was arrested.
After that, we started offering our tools and services to institutions around the world. Today, we work with reputable law enforcement agencies, crypto companies, and financial institutions around the world. We want to legitimize cryptocurrencies as an asset class that the public can safely invest in.
Of all the data you collect about the crypto space, what is the most interesting information for you personally?
The industry is developing very fast. We always see new innovations that we never expected. A year ago, hardly anyone knew what an NFT is. Today everyone talks about it. Before that came decentralized finance (DeFi), now we are dealing with decentralized organization (DAO) and central bank digital money (CBDC), which many nations want to introduce as an alternative to their fiat money.
A new study says that crypto scams were the second most common form of fraud in 2021. You have been dealing with the issue for years. How have cryptocurrency scams changed and intensified over the past year?
We see scams as a huge threat to trusting cryptocurrencies. For years, they have been one of the most lucrative criminal options for criminals. More than $7.7 billion was stolen from victims in 2021, an 80 percent year-over-year increase.
This year we are seeing a rapid increase in carpet pulls. This is a new form of scam, especially popular in the DeFi ecosystem. In these scams, supposed developers advertise a new project. They sell their tokens and then take the money from their small investors.
37 percent of fraud in the DeFi sector can be traced back to these types of scams. That’s $2.8 billion in damages. are on average carpet pulls 70 active days before scammers hide.
It recently launched a tool that allows anyone to track crypto wallets owned by sanctioned Russians. What do you want to achieve with it?
Now we must show that cryptocurrencies are an effective deterrent against sanctions evasion due to the transparency of blockchains. That’s why we made the development of this tool a top priority. All market participants must have the necessary means to make use of this transparency and carry out sanction controls free of charge. You can use our oracle to check at any time if an address is on the list. And block them.
EU and US politicians are still warning that the Russians are using crypto to evade sanctions. Do you think this is justified?
We are closely monitoring activity in space. It would be very difficult for the Russians to circumvent sanctions by using cryptocurrencies on a large scale without our noticing.
On the other hand, there is growing concern about the rise of surveillance in the crypto space and their role in it. Heidi Porter argues that services like Chainalysis could also endanger ordinary users. She warned: “Bitcoin is not censorship-proof without privacy.” How do you react to such accusations?
Neither total transparency nor total anonymity is ideal. Regulators need an appropriate level of oversight and legal authority. Companies need tools to deal with illegal activities that abuse systems.
Bitcoin represents a good balance, it promotes privacy and freedom. At the same time, it offers enough transparency to prevent abuse by criminal actors.
Some people, like whistleblower Edward Snowden, warn: The introduction of digital technologyNorth Central Bank Currencies (CBDCs) in the economies of many states would give governments the power to track, control, and shut down the flow of citizens’ money as they see fit. Are you worried about this?
Central bank digital money has the potential to curb crimes such as money laundering and fraud as these are transparent through the blockchain and regulators and law enforcement authorities could have access to the funds. user data.
But we also see that in a dictatorship like China a CBDC is used for total surveillance. The government keeps track of all transactions made with your e-yuan. The central bank and law enforcement agencies can gain access to a person’s daily transactions without suspecting illegal activity.
This loss of financial privacy has serious consequences for citizens. The government can target certain groups of people, restricting their access to the financial system and depriving them of their freedom of movement by refusing transactions to travel. This is really worrying.
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