Bitcoin is seen in this picture illustration taken October 19, 2021. (REUTERS) Chainalysis, the crypto analytics firm has launched two sanction screening tools—chain oracle and an API tool to identify any crypto wallet address associated with the country that is being sanctioned. This development comes as cryptocurency platforms such as exchanges, Decentralised Finance grapple to comply with global sanctions on Russia, in response to Russia’s invasion of Ukraine.
The analytics firm said in a blog post said that it is concerned “about the potential for cryptocurrency to be used by sanctioned entities and individuals in Russia for sanctions evasion.”
The API tool will allow any cryptocurrency business, protocol, or organization to quickly check if a crypto wallet address is on a sanctions list before allowing it to connect with their service. An on-chain oracle designed for smart contracts can check whether a crypto address is associated with Ethereum, Avalanche, BSC, Polygon, Optimism, Arbitrum, Celo blockchain is on a sanctions list. It should be noted that these tools will be free-to-use.
“These solutions will enable the builders of decentralized web3 protocols like DEXs, DeFi platforms, DAOs and DApps, as well as practically anyone interacting with cryptocurrency, to easily validate that they aren’t interacting with cryptocurrency addresses associated with sanctioned entities,”Chainalysis wrote in its blog post.
According to Chainalysis, given the transparency of blockchains, it would be difficult for the Russian government or financial elite to systematically evade sanctions at scale through cryptocurrency without detection. However, the company believes that some sanctioned Russian actors may attempt to use cryptocurrency as a means to evade sanctions.
“Now is the time for the industry to demonstrate that blockchains’ inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion,” said Michael Gronager, Co-Founder and CEO, Chainalysis. “In anticipation of ongoing sanctions, we’ve prioritized the development of these tools so that all cryptocurrency market participants have what they need to harness this transparency and conduct basic sanctions screening at no cost to them.”
Earlier this week, cryptocurrency wallet Metamask and Non-fungible-token (NFT) marketplace OpenSea dropped Iranian and Venezuelan users from their platforms citing sanctions on the two countries.
Meanwhile, cryptocurrency exchange Coinbase has blocked over 25,000 addresses related to Russian individuals or entities that the company believes “to be engaging in illicit activity.”
In another news, Changpeng Zhao, CEO of cryptocurrency exchange Binance told Bloomberg that it is freezing the accounts of Russians targeted by international sanctions. However, the exchange will not keep all Russians from accessing its platform. “Binance follows sanctions rules very strictly. Whoever is on the sanctions list, they won’t be able to use our platform, for whoever is not, they can,” Zhao said in an interview. Expanding restrictions beyond the list of sanctioned individuals would be “unethical for us to do,” he added.
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