- Crypto is becoming increasingly common in all criminal activity, says Chainalysis co-founder.
- Jonathan Levin says Tether is taking the right steps to change its image in the market.
- 65% of Chainalysis' revenue comes from the public sector.
It’s not just degenerate investors diving head-first into crypto.
Just as spot Bitcoin exchange-traded funds hit Wall Street and memecoins make overnight millionaires, police are rushing to learn the ins and outs of another type of crypto tech.
Blockchain analytics — once an esoteric tool of cybercrime divisions for tracking illicitly used cryptocurrencies — is now a necessity across all law enforcement agencies.
“There is no real crime that is just related to crypto,” Jonathan Levin, co-founder of analytics firm Chainalysis, told DL News.
“It cuts across everything from fraud, and all the white collar-type crimes, all the way to violent crime. That’s the biggest shift in the public sector business,” Levin said.
The expansion of tools that let users separate legal money from illegal money is another example of the maturing $2.1 trillion crypto industry.
Levin has had a front-row seat to this evolution thanks to Chainalysis having had an early start in the industry.
Launched in 2014, Chainaylsis and its growing suite of onchain sleuthing products have been touted as a way to identify crypto crime.
Those products let clients — be it the cops or a private business like a crypto exchange — determine whether money on the move is a civilian speculating on the latest memecoin or a hacker looking to cash out into their bank account.
It’s big business, too.
Chainalysis has already earned $85 million in federal contracts and grant funding in the United States, according to data from GovTribe. A company spokesperson told DL News that approximately 65% of its revenue comes from the public sector worldwide.
“We’re over 700 people today,” said Levin. “We are aggressively expanding internationally, from Tokyo to Seoul to Singapore to Dubai and all the way west to the West Coast of the United States.”
It also works in the private sector, with firms like wallet provider Fireblocks and crypto exchange Coinbase.
Chainalysis teams up with Tether
Tether, the industry’s largest and oldest stablecoin provider, announced in May that it would start working with Chainalysis to curb illicit activity for the dollar-pegged token.
Levin and Chainalysis will have their work cut out to help the company.
In March, a United Nations report said that $17 billion in Tether on the Tron blockchain was connected to underground crypto exchanges and criminal activities in Southeast Asia.
“We are disappointed in the UN’s assessment that singles out USDT, highlighting its involvement in illicit activity while ignoring its role in helping developing economies in emerging markets,” the company said in a statement at the time.
Another onchain analytics firm, TRM Labs, called Tether the “currency of choice” for terrorism financing.
After US sanctioned Venezuela for failing to hold free and fair elections, the state-backed oil company PDVSA turned to Tether to skirt those sanctions. Tether has said it will freeze wallets linked to any entity that is trying to evade sanctions.
When asked whether there was any risk for Chainalysis to tie up with the $117 billion stablecoin issuer, Levin said that Tether has already worked to seize stablecoins that are illicitly being used.
“As long as our clients are building those programmes, building capacity, working with law enforcement to do those things, we will go and support their ability to do that,” Levin told DL News.
“It doesn’t necessarily happen overnight, but it’s important that they are building those relationships and helping those operations.”
Still, buying analytics tools is one thing.
It’s something completely different to put them to use and operationalise the tools throughout a business.
“All of those operational details are really what a regulator looks at to know whether they are meeting expectations or not,” said Levin.
“You don’t just show your Chainalysis invoice and say, ‘I’m good.’”
Liam Kelly is a DeFi Correspondent for DL News. Got a tip? Email at liam@dlnews.com.