The blockchain forensics company CipherTrace is putting the decentralized finance industry on the curb with its new “DeFi Compli” technology. Chainlink is used for this.
Bitcoin has long stuck to the dirty image of the “darknet currency”. One of the reasons for this is that the former Darknet trading platform Silk Road was one of the first providers to pay in BTC. At the time, the misconception that Bitcoin transfers were anonymous was still widespread – much to the delight of criminal investigators. Law enforcement officers like Interpol have long since found ways and means to identify illegal activities based on blockchain data. They can get help from companies like Chainalysis. CipherTrace is also one of the better-known companies that have dedicated themselves to blockchain forensics – now with the support of Chainlink.
CipherTrace targets DeFi
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Ciphertrace develops solutions that aim to make the crypto sector more tangible for financial market regulators and law enforcement agencies. Coins with particularly strong privacy properties, such as Monero (XMR), are naturally a thorn in the side of the latter. Accordingly, the company is also working on solutions to lift the veil around XMR transactions.
DeFi is also one of those areas in cryptoversum where the long arm of the law often does not work. At the end of 2020, CipherTrace had already voiced concerns that the DeFi space could develop into a mecca for money laundering. There was already one verifiable case last year. The masterminds of the attack on the Bitcoin exchange Kucoin have laundered a double-digit million amount from their booty (the equivalent of USD 275 million) via the decentralized exchange Uniswap. That has, among other things, Chainalysis approved.
With “DeFi Compli”, the company has now presented a new technology that is supposed to help put a stop to money laundering in the DeFi sector.
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Chainlink as a data messenger
For DeFi Compli, CipherTrace set up a node in the decentralized Oracle network Chainlink. This network node provides AML (Anti Money Laundering) data from CipherTrace for smart contracts. This should make it possible to create DeFi applications that are in line with international anti-money laundering guidelines. The fight against the financing of terrorist activities via DeFi platforms should also be declared, explains Dave Jevans, CEO of CipherTrace:
The $ 40 billion invested in DeFi protocols makes the DeFi exchanges and protocols an even bigger target. Ensuring that sanctioned addresses cannot use DeFi to fund weapons of mass destruction programs should be a major concern of DEXs right now. CipherTrace’s DeFi Compliant Regulatory Compliance Oracle on Chainlink can help DeFi protocols achieve the compliance necessary to ensure the long-term viability of crypto.
Chainlink is responsible for supplying the Smart Contracts of DeFi applications with the AML data from CipherTrace. In this way, rule-compliant DeFi applications are to be created that are “equally suitable for users, institutions and governments”, as stated in the wording of the press release called. CipherTrace sees this as the one important step in bringing DeFi applications into the mainstream.
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