Institutional interest in digital assets is growing, and with it, the demand for on-chain analytics platforms. These tools are invaluable to compliance experts, investigators, and regulators who need to understand the patterns and entities involved in cryptocurrency transactions. Tom Robinson, co-founder and chief scientist at analytics firm Elliptic, and Eray Akartuna, a senior cryptocurrency threat analyst at Elliptic, recently shared their insights with Cointelegraph on this topic.
Robinson outlined several use cases for on-chain analytics for institutional clients. These include Anti-Money Laundering (AML) and sanctions compliance for crypto exchanges and businesses dealing with crypto assets, due diligence on crypto businesses, and investigating crypto transactions. He emphasized that the visibility of most crypto transactions on the blockchain makes it easier to identify funds originating from criminal activity.
Akartuna highlighted the role of artificial intelligence (AI) and machine learning in on-chain analytics, particularly in fraud prevention and AML. He explained that machine learning can help identify patterns in blockchain transactions, which can differ between blockchains like Bitcoin and Ethereum. He also discussed the use of heuristics to identify illicit activities and actors on a blockchain and their wallet addresses.
One of the most complex problems Elliptic has recently solved, according to Robinson, is identifying proceeds of crime in crypto, even when laundered cross-asset and cross-chain. They developed a method called holistic screening to trace crypto funds between assets and blockchains, which is now essential to prevent money launderers from exploiting businesses’ lack of visibility into their activity.
Akartuna noted that while banks’ adoption of digital assets and on-chain analytics has been slow, it is steadily increasing. Compliance is a top concern for banks, and blockchain analytics is seen as a crucial part of addressing regulators’ concerns. He also mentioned the importance of these tools for institutions looking to get involved in the decentralized finance (DeFi) space.
Robinson added that they maintain a constant dialogue with regulators worldwide, many of whom use Elliptic’s products. This communication is vital for regulators to understand how blockchain analytics solutions function and to have confidence in the compliance programs run by exchanges and banks using these products.