Cryptocurrency investing has taken the country by storm in recent years. With unprecedented volatility, the promise of high margins, and security problems, crypto is both loved and hated.
The underlying Blockchain Technology has a variety of proven use-cases across myriad industries. But the predominant majority of people see cryptocurrencies as an asset class to invest in.
Nonetheless, a major roadblock people face while investing in cryptocurrency or while exploring the various avenues around cryptocurrency is the question of security.
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The Need For Blockchain Intelligence
It is natural for people to come up with critical crypto security questions like:
Is it safe to be invested in cryptocurrency? Is the Crypto that we hold a clean asset?
How do we differentiate between clean and dirty cryptocurrency?
How to ensure the bitcoin we are buying is not from an illicit activity like fraud and money laundering?
How do the exchanges that we use ensure the safety and security of our cryptocurrency?
In order to find answers to the above cryptocurrency security questions, a new and dynamic field – Blockchain Analytics has emerged. Popular exchanges, Financial Institutions, Regulators, and Law Enforcement Agencies deploy Blockchain Analytics companies like TRM Labs, Chainalysis and Coinfirmto gather blockchain data and effectively analyse them to ensure cryptocurrency security and risk management.
Today, the most popular use-case of Blockchain Intelligence is monitoring and investigating cryptocurrency transactions & addressesfor the prevention of fraud & financial crime.
For instance, CoinSwitch Kuber, India’s crypto trading exchange app works with Chainalysis to ensure all the crypto transactions are clean and safe from any kind of security breaches and financial irregularities.
Before we understand how crypto exchanges like CoinSwitch Kuber ensure cryptocurrency security, let us look into the prominent use cases of this new and emerging technology – Blockchain Intelligence.
Popular Use-Cases for Blockchain Intelligence:
Crypto Exchanges, Financial Institutions and other Virtual Asset Service Providers use blockchain intelligence tools to meet regulatory & licensing requirements around sanctions, anti-money laundering, and counter-terrorism financing.
Regulators use blockchain intelligence to monitor the crypto financial system, inform policy decisions, and better enforce regulations.
Law Enforcement Agencies use blockchain intelligence tools to solve crypto-based crime, “follow the money”, and link activity on blockchains to real-world entities.
Indian authorities have previously expressed concern that crypto assets could be used for criminal activity such as money laundering and funding terrorism. By deploying Blockchain Intelligence tools, exchanges like CoinSwitch Kuber demonstrate a robust capability to detect and prevent illicit activity from occurring on its platform.
How do Exchanges like CoinSwitch Kuber Ensure Cryptocurrency Security?
Blockchain Analytics companies provide sophisticated Blockchain Intelligence tools to detect, assess, and investigate crypto-related frauds and financial crimes.
Crypto Exchanges, such as CoinSwitch Kuber use these tools to ensure regulatory compliance and cryptocurrency risk management. The tools enable exchanges with crypto wallet screening, transaction monitoring and conducting crypto investigations seamlessly.
Besides, to ensure Crypto Security and Risk Management, Crypto Exchanges perform KYC and KYT. Know-Your-Customer (KYC) is done to ensure that no illegal activity happens on their platform in the real world. Whereas, Know-Your-Transaction (KYT) is done to ensure that no illegal activity happens on their platform in the digital world.
Also, in addition to Fiat Transaction Monitoring, AML Sanctions Screening provided by banks will ensure that all the cryptocurrencies that you are dealing with are clean, untainted, and safe to use and invest in.
More on Blockchain Analytics for Crypto Risk Management
The same properties that make it a force for good – decentralized, programmable, and instantaneous value transfer mechanism – are also making it susceptible to financial crime and fraud. However, Crypto’s promise for a better future is too valuable to leave these risks unchecked. To achieve these objectives, the field of Blockchain Analytics is emerging.
Blockchain Analytics is a new industry that works on gathering Blockchain Intelligence data. By creating software that analyzes the massive alpha-numeric blockchain raw data, cryptocurrency risks can be effectively addressed.
In the same way that search engines have organized the web, blockchain intelligence companies are organizing blockchain data to make it more useful for the world.
What can the users do to ensure the safety of their crypto assets?
Before investing in cryptocurrencies, it is important to perform a self-evaluation on the exchanges one would be using.
Does your exchange have a robust cyber security infrastructure?
Do they use reputed Blockchain Analytics tools to prevent frauds and ensure security?
Does the exchange have a strong Know-Your-Transaction (KYT) and Know-Your-Customer (KYC) mechanism that ensures transparency, security, and compliance with local laws, regulations, and rules! Happy investing!
P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.
An alumnus of IIT Madras and ISB Hyderabad, Akand leads the Business Strategy team at TRM Labs. He is one of India’s foremost experts on crypto-crime, blockchain, and cryptocurrencies. He has conducted numerous workshops for Law Enforcement Agencies on how to detect, investigate and prevent crypto-crimes. He regularly posts insights on LinkedIn around the fascinating world of cryptocurrencies and crypto crime.