With the launch of blockchain monitoring for Zcash and Horizen on the Elliptic platform, we explain why the risk associated with these assets is actually lower than is frequently assumed, and how regulated financial institutions can now safely support this important class of cryptoasset.
Blockchain monitoring solutions provide regulated financial institutions with the ability to determine source or destination of funds when handling cryptoassets such as bitcoin. This allows them to provide their customers with access to these assets, and comply with their anti-money laundering and sanctions compliance obligations.
These solutions rely on the fact that crypto transactions are recorded on a public ledger, known as a blockchain. At Elliptic we combine blockchain information with proprietary data to provide financial institutions with blockchain monitoring solutions that follow the money trail, and allow them to screen crypto transactions for links to illicit activity.
Dealing with the compliance risks of mixers
But sometimes cryptoasset users do not want their transactions to be traceable on the blockchain. This might be because they are engaged in criminal activity that they wish to remain hidden from law enforcement. But more likely, they simply wish to maintain their financial privacy and autonomy – necessary traits of an open society.
When using bitcoin, one way to achieve enhanced privacy is to use a “mixer”. Mixers are online services that allow their users to pool their cryptoassets together, before returning the amount deposited to each contributor (minus a fee). Importantly, the specific “coins” received are different to the ones deposited in the pool – breaking the transaction trail.
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