Blockchain analytics firm Chainalysis has announced the launch of two screening tools that are meant to allow cryptocurrency investors to determine if their wallets of choice are compliant with global sanctions. The two tools — an on-chain oracle available immediately and an API expected to launch next month — are being offered by the company free of charge. The announcement from Chainalysis comes as crypto's potential role in sanctions on Russia draws attention among policymakers and regulatory bodies across the world.
Chainalysis claims that as countries around the world continue to leverage economic sanctions in response to Russia's invasion of Ukraine, decentralised Web3 groups like decentralised exchanges (DEXs), decentralised finance (DeFi) platforms, decentralised autonomous organisations (DAOs), and decentralised app (DApp) developers are on the hunt for lightweight tools to help them and their customers comply with sanctions. "These tools will enable users to easily validate they are not interacting with cryptocurrency wallets associated with sanctioned entities," states the blockchain analytics company.
"Given the transparency of blockchains, it would be difficult for the Russian government or financial elite to systematically evade sanctions at scale through cryptocurrency without detection. However, as with the traditional financial system, some sanctioned Russian actors may attempt to use cryptocurrency as a means to evade sanctions," says Chainalysis in a press release.
The analytics company that provides blockchain tracing tools to government agencies and law enforcement and helps crypto firms like exchanges identify high-risk wallets notes that while centralised exchanges, such as Coinbase or Kraken, already have know-your-customer (KYC) checks in place to screen for sanctioned individuals, decentralised exchanges that exist in the world of DeFi largely do not.
Chainalysis' oracles, which is one of the two tools being announced, are essentially smart contracts that validates if a cryptocurrency wallet address has been included in a sanctions designation. The smart contract is maintained by Chainalysis on a variety of popular blockchains and will be regularly updated to reflect the latest sanctions designations listed on economic/trade embargo lists from organisations including the US, EU, or UN.
Later this month, the firm plans to release a free API that will allow crypto users to identify wallet addresses under sanctions from all chains.
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