Blockchain-data analytics company Chainalysis has announced an accelerated launch of two sanctions screening tools. It’s an a-chain oracle, and an API, to help provide greater regulatory oversight to exchanges and DeFi projects.
According to the report provided by Chainalysis on March 10, the screening tools include two main components of new tracking software. This software will assist exchanges in screening wallets and transactions for the activity that appears to be skirting economic sanctions. The first tool, which is immediately available, is an on-chain oracle.
Chain Oracle By Chain Analysis
An on-chain oracle is a smart contract that is more specifically about DeFi (decentralized finance) projects. It validates whether or not a cryptocurrency wallet address has been included in a sanctions designation. This means that all wallets are on the lists of economic sanctions provided by the US, the EU and the UN. Also, it will be available automatically available to anyone running the oracle.
The second tool that will release the next month, is an application programming interface (API). An API uses the exact same data as the on-chain oracle. It validates whether a wallet is included on any sanctions list. However, it is to use on a much broader variety of applications, including centralized crypto exchanges and mobile user interfaces.
Speaking on the importance of transparency in cryptocurrency, co-founder and CEO of Chainalysis, Michael Gronager said in a statement,
“Now is the time for the industry to demonstrate that blockchains’ inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion.”
Further, he added that Chainalysis has accelerated the development of its screening tools. It would be releasing them to anyone in the crypto industry free of charge.
“In anticipation of ongoing sanctions, we’ve prioritized the development of these tools so that all cryptocurrency market participants have what they need. They want to harness this transparency and conduct basic sanctions screening at no cost to them.”
Currently, users of DeFi platforms can operate with more anonymity than a centralized exchange. This tends to have more strict identity verification protocols in place such as KYC.
CoinBase Supported This Idea of Chainalysis
US-based cryptocurrency platform, Coinbase has further supported the idea that the inherent transparency and public nature of cryptocurrencies. Also, it can actually assist governments in enforcing sanctions.
Where traditional fiat currencies allow bad actors to use shell companies, tax havens, and opaque ownership structures to “obscure the movement of funds”. Moreover, the crypto assets are fundamentally public and traceable. In addition, it’ll help to govern authorities “detect and deter evasion adds,” said Coinbase chief legal officer Paul Grewal in a blog post earlier this week.
