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Paxful to Use Chainalysis Crypto Surveillance Tool

Cryptocurrency P2P service, Paxful partners with crypto tracking platform Chainalysis to use the latter's KYT market surveillance tools.
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New York-based peer-to-peer exchange Paxful, recently collaborated with blockchain analysis firm Chainalysis, to use Chainalysis’ Know-Your-Transaction (KYT) compliance tool to monitor cryptocurrency exchanges on the p2p platform.

While the analytics firm has mainly teamed up with crypto exchange platforms, Paxful becomes the first p2p exchange to partner with Chainalysis.

Chainalysis Records First P2P Crypto Exchange Partnership

Paxful announced the news of the partnership via a press release on Monday (March 23, 2020). According to the statement, the p2p crypto exchange will use two of Chainalysis investigative tools: Chainalysis KYT and Chainalysis Reactor.

While the former will aid in monitoring virtual currency transactions on the platform in real-time, the latter will investigate suspicious crypto transactions on the exchange.

Commenting on the collaboration, Paxful’s Chief Compliance Officer, Lana Schwartzman, said:

“At Paxful, compliance and security are top-of-mind as we work to keep the marketplace free from fraud and scammers. Partnering with Chainalysis was a great  choice as we work to protect our users and instill in them the importance of regulation and compliance on P2P marketplaces like ours.”

This is the first time that the blockchain analysis outfit will be partnering with a p2p crypto exchange. Chainalysis has always been wary of p2p exchanges because of their private and highly decentralized nature, which is risky.

But according to the press release, what makes Paxful stand out is that the p2p exchange boosted its compliance and know-your-customer (KYC) policies, setting a precedent for similar platforms. Consequently, instead of labeling all p2p exchanges as risky, the blockchain analysis firm has changed its policy.

A statement from the VP Product for Chainalyis, John Dempsey, reads:

“Compliance is the key factor for establishing trust in cryptocurrency exchanges. By adopting a case-by-case approach to evaluating P2P venues, we are helping to broaden trust and transparency across the cryptocurrency ecosystem.”

The use of Chainalysis KYT will help Paxful to monitor large crypto transactions and immediately identify any risks. Employing Chainalysis investigative tools will help Paxful combat fraud and illicit activities on its platform.

Chainalysis has partnered with a host of virtual currency exchanges bigwigs such as Binance, Bitfinex, Coinfield, and Bithumb to ensure robust compliance and combat fraudulent transactions on these platforms.

Combating Rogue Actors in the Cryptocurrency Space

Paxful’s partnership with Chainalysis is part of a growing trend of crypto trading platforms taking steps to combat the activities of criminals and other rogue actors in the cryptocurrency space. On Tuesday (March 24, 2020), Bitfinex announced the launch of Shimmer  — a proprietary surveillance tool designed to prevent market abuse.

According to a press release by Bitfinex, the Shimmer tool will be used to prevent illicit trading activities like wash trading and layering. Commenting on the launch, Paolo Ardoino, chief technology officer (CTO) at Bitfinex, remarked:

“Comprehensive market and trade surveillance capabilities are integral to operating a leading cryptocurrency exchange. To meet the complex needs of an evolving digital asset class and to protect our sophisticated participants, Bitfinex has chosen to develop its own state-of-the-art surveillance system. This will help to assure that potentially manipulative practices are rooted out and suspicious behavior detected.”

Back in February 2019, Blockonomi reported that Nasdaq was working with seven crypto exchange platforms. At the time, major platforms like Gemini were deploying the Nasdaq SMARTS Surveillance tool to combat wash trading and other illegal trading activities.

The crypto market has been plagued with reports of rampant wash trading with several studies pointing to trading volumes being exaggerated. The prevalence of these illicit activities is one of the reasons why given by the U.S. Securities and Exchange Commission (SEC) for refusing to approve any Bitcoin ETF application.



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Osato is a Bitcoin enthusiast who can often be found providing insight on the latest Bitcoin-related news. When he isn't closely monitoring stories in the industry, he is either attempting to beat his scrabble high score or internally debating some existential dilemma. Contact Osato@Blockonomi.com

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