It seems the compliance bug has finally bitten Binance.
The world’s most popular cryptocurrency exchange is looking to appease government regulators worldwide with some fancy new tech built to detect suspicious trading activity.
In a press release, Binance confirmed it has integrated its systems with proprietary compliance software built by blockchain tech firm Chainalysis, named Know Your Transaction (KYT).
“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users,” said Jonathan Levin, Chainalysis’ co-founder.
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KYT apparently uses pattern recognition, algorithms, and “millions of open source references” in order to raise live alerts on cryptocurrency transactions it decides are suspicious.
Binance call the blockchain detectives
Chainalysis made waves when it helped track and nab the scumbags behind the monstrously epic Mt. Gox scam.
This eventually led to the commissioning of Chainalysis by the Federal Bureau of Investigation, the Drug Enforcement Administration, the Internal Revenue Service – even Europol – to track elusive cryptocurrency baddies.
It’s also no surprise Binance have caught the regulatory jitters. Recently, its stablecoin of choice, Tether, has been embroiled in controversy after a decline in investor confidence forced it unstuck from its intended $1 value.
After all, Binance only adopted stablecoins like Tether in the absence of legitimate banking partners willing to provide the critical financial services necessary to support live, fiat-based cryptocurrency trade.
In fact, Binance’s first-and-only cryptocurrency-to-fiat markets are expected to open in two weeks, but only through its new exchange in Uganda.
The hope is there will be more – but only if Chainalysis’ fancy policing system works as advertised.
For what it’s worth, competitor exchanges are implementing their own systems in a bid to play nice with regulators.
The Winklevoss twins, who own the Gemini cryptocurrency exchange, even hired financial giant Nasdaq to surveil its Bitcoin and Ethereum markets.
At the time, this was seen as an attempt to attract new customers.
The news of Binance incorporating a similar system should really be viewed in the same light, despite it being too early to tell if such technologies actually decrease suspicious activity on cryptocurrency exchanges.
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