As governments worldwide intensify regulatory scrutiny on cryptocurrencies, a growing number of startups have built their business models around blockchain surveillance. Two major players, Chainalysis and Ciphertrace, recently announced significant expansions to their monitoring capabilities, bringing 87% of the global crypto trading volume under surveillance.
Chainalysis Adds ERC20 Token Tracking, Aims for 90% Market Coverage
On October 3, 2019, blockchain forensics firm Chainalysis revealed it had begun tracking 21 popular ERC20 tokens, including Maker (MKR), Dai (DAI), and Basic Attention Token (BAT). Co-founder Jonathan Levin stated that regulators and investigators expressed interest following an increase in illicit activities involving these tokens. Notable incidents include the September 2017 hack of decentralized exchange Etherdelta, where thousands of dollars in ERC20 tokens were stolen via a malicious code injection attack, and the 2019 robbery of Cryptopia, which resulted in losses exceeding $16 million in ETH and ERC20 tokens. Chainalysis built ERC20 support in "a matter of weeks" and now serves over 130 customers across 35 countries. By year-end, the company plans to track 39 ERC20 tokens and nine other cryptocurrencies, covering 90% of the market by trading volume.
Ciphertrace Monitors 700 Cryptocurrencies, Covering 87% of Global Volume
Rival firm Ciphertrace has also scaled its operations, now monitoring 700 different cryptocurrencies, including LTC, USDT, BCH, ETH, BTC, and various ERC20 tokens. The company claims its platform "provides visibility into 87% of global trading volume" and maintains a database of 522 million attribution data points, including account types, account holders, contract types, contract owners, and other metadata. Ciphertrace describes itself as one of the "most comprehensive" cryptocurrency intelligence teams, calling the latest update a "giant leap." The infrastructure leverages advanced APIs, interactive visualization, a graph database, and pattern recognition to de-anonymize transactions.
Government Agencies Embrace Blockchain Forensics as Business Model Proves Profitable
Multiple U.S. federal agencies—including the IRS, DEA, ICE, and FBI—have long relied on blockchain forensics firms like Chainalysis, Elliptic, and Ciphertrace. These companies believe their software possesses powerful de-anonymization capabilities that help financial institutions and law enforcement uncover illicit behavior. Ciphertrace emphasizes that its attribution data pool is the most accurate in the industry, covering millions of addresses with rich metadata. As cryptocurrencies continue to be used in money laundering, fraud, and hacking, blockchain surveillance has become a critical tool in combating financial crime. Both firms are expected to expand their monitoring scope further, covering additional blockchain assets in the near future.