The majority of developed countries have been actively working on the cryptocurrency and blockchain regulatory frameworks. When preparing the draft laws, they often cooperate with companies engaged in monitoring blockchain networks; one of the most widely known is Chainalysis. In 2017 alone, the organization earned about $700,000 from collaboration with public authorities and law enforcement agencies.
Chainalysis was founded in 2014 by Jan Møller, Jonathan Levin, and Michael Grønager. The company's main area of expertise is monitoring blockchains and cryptocurrency transactions to combat money laundering and fraud. There are many competitors offering similar services, yet Chainalysis is chosen by European organizations such as Europol and almost all U.S. government agencies.
In the past year, Chainalysis made over $700,000 from working for the U.S. Department of Homeland Security (DHS), the Internal Revenue Service (IRS), and the U.S. Immigration and Customs Enforcement (ICE). The company was also often hired by private businesses, which can be concluded from quarterly reports indicating numerous partnership agreements.
Among company's loyal clients is the Federal Bureau of Investigation (FBI) that has been paying Chainalysis for the past few years.
Assistance in investigations
Chainalysis helped FBI achieve significant results in investigating users of an anonymous Internet marketplace SilkRoad, as well as clarify bankruptcy details of the exchange Mt.Gox. It was Chainalysis employees who traced those 650,000 bitcoins that had been lost. Chainalysis claimed that at the congressional hearing.
Also, the monitoring company helped a U.S. court rule that Coinbase had to supply the IRS with identifying information on 14,000 users. This decision was made in light of the investigation led by IRS which suspected that the majority of the exchange's users had not paid taxes. According to the 2015 data from the IRS, only 802 taxpayers claimed bitcoin gains.
Impact on crypto market
The company's website says that Chainalysis believes in cryptocurrencies and the blockchain technology and aims to provide organizations with tools for preventing fraudulent financial activities while respecting the right to confidentiality. But in fact, services that the company offers link specific entities to specific transactions in the network.
For instance, thanks to services provided by Chainalysis, IRS is capable of tracking activity of bitcoin and altcoin holders and monitor whether they are paying taxes. This means that transactions made using cryptocurrencies such as bitcoin cannot be viewed as anonymous. Chainalysis clients also get detailed reports on transactions in a blockchain and potential clients and partners.
Since there is a growing number of governments and officials using the company's offerings, many members of the crypto community feel worried since they advocate preserving every individual's right to anonymity and believe in the future of cryptocurrencies with no government oversight. Hermitage Capital fund CEO Bill Browder thinks, however, that firms such as Chainalysis make investors consider cryptocurrency a more attractive and secure way of investing their money.