The compliance and investigation tools on the “Chainalysis” platform have significantly contributed to solving some of the most prominent criminal activities in the blockchain industry.
Many experts not only recognize Chainalysis as the developer of some of the industry’s most well-known compliance and investigation tools but also believe that these tools have made a substantial impact on addressing some of the most prominent criminal activities in the blockchain industry. As new industries move into the Web3 world, Chainalysis continues to pave the way for supervision and compliance within this sector with its tools.
Chainalysis is one of the leading platforms in data analysis for the blockchain and cryptocurrency industry. Many experts regard it as the top analytical source, especially for on-chain data related to cryptocurrencies.
In this article, we aim to provide a more detailed evaluation of the platform’s capabilities, services, and benefits. Many believe that Chainalysis services can help various businesses prevent hacks, breaches, and capital loss.
What is Chainalysis?
Chainalysis is a U.S.-based platform headquartered in New York, offering blockchain software and data services. It provides comprehensive analytical and investigative tools to government agencies, cryptocurrency companies, and financial institutions. Chainalysis is recognized as a leading company in blockchain data analysis, developed in line with cryptocurrency industry standards. Its specialized tools are offered in over 60 countries worldwide.
The company was founded in 2014 by three co-founders, Michael Gronager, Jan Moller, and Jonathan Levin, initially serving as the official investigator for the Mt. Gox exchange hack. It became the first startup to offer direct Bitcoin tracking services.
According to Crunchbase, Gronager and his team have successfully raised $536.72 million across 13 funding rounds, with Chainalysis valued at sixteen times this amount as of May 2022, reaching an estimated valuation of over $8.6 billion.
Clients and Market Coverage
Based on data from Chainalysis and CBInsights, the platform currently serves over a thousand institutional clients, a reach that no other company has achieved. Chainalysis offers services and products to five main client groups: law enforcement agencies, regulators, tax authorities, financial institutions, centralized exchanges, and decentralized finance (DeFi) applications.
Chainalysis provides services to over a thousand enterprise clients that no other company in the world can access.
Currently, Chainalysis provides services not only to cryptocurrency companies and brokers, including major exchanges like Bitfinex and Gemini, but also to government clients such as the U.S. Federal Bureau of Investigation (FBI), the Drug Enforcement Administration (DEA), the U.S. Department of Justice (DoJ), the Criminal Investigation Division of the Internal Revenue Service (IRS), the World Economic Forum (WEF), and the UK’s National Crime Agency (NCA). Among the numerous instances where Chainalysis has supported law enforcement, notable cases include assisting the U.S. government in recovering over $1 billion in cryptocurrency assets from the Silk Road site, seized by the FBI in 2020.
In October 2019, the company aided the U.S. Department of Justice in tracking and shutting down the largest child exploitation website that operated in exchange for cryptocurrencies.
Chainalysis also traced seven cryptocurrency thefts in 2021, all linked to North Korea’s Lazarus Group. Additionally, the company helped U.S. investigators and South Korea’s National Intelligence Service track $100 million stolen from the Harmony cryptocurrency firm by North Korean hackers, with $1 million of stolen funds recovered in April 2023.
The cases where Chainalysis’s services have assisted law enforcement to date are countless.
Chainalysis provides services across three major sectors: cryptocurrency businesses, financial institutions, and government organizations.
Its core expertise lies in offering compliance solutions tailored for cryptocurrency businesses, providing a comprehensive approach to ease regulatory burdens for these clients. By assigning dedicated account management teams, Chainalysis ensures each client’s compliance with current laws, especially anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, with peace of mind.
In addition to these services, traditional financial institutions face unique challenges when integrating blockchain with their existing infrastructure. Chainalysis facilitates this transition by granting banks and financial institutions access to the same data used by regulators. This approach allows traditional financial entities to incorporate blockchain with minimal risk, fostering sustainable growth within these institutions.
For government clients, Chainalysis offers actionable insights to combat criminal organizations. Given the evolving tactics criminals use to evade legal oversight, Chainalysis maintains its leadership in tracking and intercepting illicit activities through the development of advanced investigative tools. These tools enable government organizations to identify suspicious on-chain activities, providing valuable data on crimes like terrorism, sex trafficking, and money laundering. Government agencies leveraging Chainalysis services can significantly enhance their capabilities in legal actions against criminal networks.
Chainalysis Services and Products
Generally, Chainalysis offers three categories of services, products, and blockchain solutions on its website. Let’s take a closer look at each:
The first category includes three services: Crypto Investigations and Special Programs, Crypto Incident Response, and Chainalysis Academy, an educational program.
The second category features eight products: Reactor, StoryLine, Know Your Transaction (KYT), Playbook, Transpose, Address Screening, Free Sanction Screening, Kryptos, Business Data, and Market Intel.
Chainalysis’s solutions are divided into three sections: Investigation, Compliance, and Chainalysis Data.
Many experts regard Chainalysis as a hybrid of an intelligence agency and a forensic organization for the blockchain, owing to the vast range of services it provides.
Reactor
Chainalysis Rector can be considered the ideal solution for investigating, analyzing, and linking cryptocurrency transactions on the blockchain to real individuals and monitoring them. Through this product, each transaction on the network is examined based on an identifier, establishing the connections of each cryptocurrency address in the network with thousands of social networks and DarkNet sites. With Rector, one can determine which entity manages which wallet and which assets. Is there a suspicious entity that should be monitored?
Rector can be seen as a tool for visualizing transactions on the blockchain, enabling users to easily investigate criminal activities with a simple user interface. This product maps hundreds of millions of wallet addresses to real-world entities, allowing users to monitor communications and related activities simply by entering a blockchain wallet address.
Storyline
As the cryptocurrency ecosystem continues to evolve, transactions on the blockchain have become increasingly complex and widespread. The rapid expansion of this industry, from DeFi protocols to cross-chain bridges, has made it difficult for even the most experienced analysts to track the movement of digital assets. Chainalysis’s new product, Storyline, presents on-chain events in a comprehensible timeline and allows users to understand the complete story of a transaction and its interactions. Perhaps the greatest strength of Chainalysis lies in its ability to visualize transactions through a simple user interface.
Unlike Rector, Storyline has been specifically created for the decentralized space of this industry and depicts the interactions of smart contracts and decentralized applications in plain language.
KYT
The Chainalysis transaction verification system can be viewed as a combination of blockchain intelligence, an easy-to-use interface, and an instant API. This transaction verification system enables companies that work with or transact in cryptocurrencies to comply with local and global regulations while reducing manual processes.
The transaction verification system, or KYT, detects risky activities by examining user behavior patterns. These activities include investigations into dark web markets, quasi-scam and scam activities, sanctioned addresses, and deviation transactions. Additionally, the instant API of this service enables the prevention of withdrawals from blacklisted addresses alongside the blocking of suspicious wallets for users. Interestingly, this service’s customization capabilities are based on the anti-money laundering policies adopted by each company.
Moreover, this software seamlessly aligns with the activities of compliance teams, ensuring that all matches applied by the team are also enforced by the policies of this product, ultimately allowing these activities to be shared with banks and regulators based on the latest policies.
Playbook
Playbook is one of Chainalysis’s new products that helps users reduce risk by timely detecting market drops and on-chain movements. Essentially, Playbook is designed to analyze user behaviors and off-chain data so that companies dealing with cryptocurrency users can achieve maximum efficiency while enhancing user lifetime value.
This system aids blockchain businesses in anticipating user needs before demand arises, enabling them to run informed and personalized campaigns without relying on other teams.
Transpose
Transpose is a blockchain startup focused on translating low-level blockchain data into a set of high-level, human-readable APIs. It was acquired by Chainalysis in May 2023. Through this product, entrepreneurs can prepare their minimum viable products (MVPs) for launch using webhooks or websockets, without needing complex blockchain technical knowledge.
Address Screening and Compliance with Sanctions
The Address Screening section relies on Chainalysis’s powerful API, based on its free sanctions compliance tools, providing information about smart contract abuses, hacks, terrorism financing, and wallets related to sanctions.
According to Chainalysis, the primary applications of these two sections are to create transparency and protect businesses through these tools in non-fungible tokens (NFTs) and decentralized finance (DeFi).
Chainalysis states that sanctioned entities refer to those listed in the economic/commercial sanctions lists of the United States, the European Union, or the United Nations, and anyone under those jurisdictions. Currently, this list includes the Specially Designated Nationals (SDN) list from the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department.
Kryptos
The Kryptos service allows businesses to access a wealth of reliable on-chain data. Kryptos clients can use this tool to monitor the activities of over 6,500 services and make informed decisions about potential partners in the industry. With a simple user interface, Kryptos can create a chain profile for each listed business, displaying data about various levels of risk associated with each to aid companies in their decision-making processes.
Business Data
The Business Data tool is not listed in the product and service menu of Chainalysis, but it helps users, mainly related to cryptocurrency businesses, gain a better understanding of their customer base, create new revenue streams, and develop new products and services on the Web 3 platform. This actionable data assists these businesses in making data-driven decisions, improving customer experiences, and optimizing marketing strategies. Additionally, this product plays a crucial role in many other offerings provided.
Market Intel
Market Intel serves both individual users and businesses. This product is essentially a market research tool and serves as a resource to assist in research and investment in the industry. This service helps Chainalysis clients develop data-driven investment strategies using the company’s proprietary dataset, available since 2014.
In addition to this range of products, Chainalysis offers extensive services in educating professionals in the blockchain industry, all under the Chainalysis Academy. For instance, the company provides reputable certifications in various fields, enabling individuals to become recognized experts in regulatory compliance. Currently, certifications include the Cryptocurrency Fundamentals for Beginners (CCFC) and Chainalysis Reactor Certification (CRC) for chain analysis, Chainalysis KYC Certification (CKC) aligned with the transaction verification product, and Chainalysis Investigator Certification (CISC) for advanced research and obfuscation techniques for Reactor users.
