Crypto-Tracing Software Firm Expands to Cover More Currencies

(Bloomberg) -- Chainalysis Inc., a maker of anti-money-laundering software, is widening the reach of its products that monitor cryptocurrency trading amid heightened demand for secure transactions.

The startup, which spent months refining Bitcoin-tracing software, today can begin detecting criminal activity and money laundering in Bitcoin Cash, co-founder Jonathan Levin said in a phone interview. The company plans to support investigations and monitoring of 10 cryptocurrencies by year-end. Customers are interested in tracing Ether, Litecoin, Ripple and Ethereum Classic, among others, he said.

“We think about our brand as being the trust provider between the people, the companies and the government in transacting on the blockchain,” Levin said. “Those are critical components to enable billions of people to transact. We want to open up the doors to mainstream adoption.”

Investigators used Chainalysis to help track funds when Mt. Gox, a now-defunct Japanese exchange, disclosed in 2014 that Bitcoins valued at hundreds of millions of dollars had gone missing. The company’s software helped bring about at least one arrest, Chief Executive Officer Michael Gronager said.

Cryptocurrency transactions have been challenging to track. Coin owners are usually represented by so-called addresses -- a series of dozens of numbers and letters. Each person can have multiple addresses. And some newer cryptocurrencies have extra privacy features that further shield user identities. While Chainalysis doesn’t yet see much demand to monitor privacy-conscious coins like Monero, building such tools is possible, Levin said.

Also today, Chainalysis announced a new product that will let exchanges flag high-risk transactions as they happen. The tool can compile customer profiles over time, so one suspicious move could lead to a review of all transactions by a specific user.

Chainalysis tools help coin exchanges to comply with regulators’ Know Your Customer requirements. They also make it easier for companies supporting cryptocurrencies to open bank accounts. Chainalysis says it works with firms including Barclays Plc and has reviewed more than $15 billion of transactions.

To pay for the expansion -- particularly in its sales force -- Chainalysis said it has raised $16 million in a funding round led by Benchmark.

“It felt like if you believed that the cryptocurrency ecosystem is a growing ecosystem, which I do, the need for a tool like Chainalysis is only going to grow,” Sarah Tavel, general partner at Benchmark, said in a phone interview. Tavel said she reached out to Chainalysis after talking with a former law-enforcement official in the Mt. Gox case.

Chainalysis, with over 75 employees, has more than tripled its revenue and customers in the past year, Levin said. It competes with companies including London-based Coinfirm.

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