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The crypto sector has been under intense pressure following the sanctions imposed against Russia by the US and other Western countries. With regulators becoming concerned about Russia using crypto to avoid these sanctions, Chainalysis has developed tools to ensure firms can monitor the sanctions and be compliant.
Monitoring sanctions in crypto
Chainalysis released a statement talking about the two tools used to monitor imposed sanctions. One of these tools is an on-chain oracle released on March 11. It will store data related to the economy provided by the US, EU or the United Nations. The oracle will be like a smart contract to validate a blockchain wallet.
The other tool is the API tool adapted for web and mobile platforms. It will use the same data in wallet validation and be released in April 2021. The two tools will be free to use.
The Chainalysis statement noted that “these innovations are available to both good and bad actors. While the industry celebrates the Ukrainian government’s successful fundraise, we’ve also heard concerns about the potential for cryptocurrency to be used by sanctioned entities and individuals in Russia for sanctions evasion.”
The two tools will be geared towards web 3 applications such as decentralized exchanges (DEXs). It will target the platforms that “do not have the lightweight solutions they need to comply with sanctions policies.”
The world of DeFi is not big on KYC and AML requirements. Therefore, this tool might go a long way in ensuring DeFi platforms comply with the imposed regulations.
Pressure on crypto
Over $50 million has been donated to the Ukrainian government to help its war efforts. However, there have been concerns that despite the good that crypto has done to Ukraine, it could be used to avoid the sanctions imposed by the US and its Western allies.
These concerns have prompted increased pressure on the cryptocurrency sector to ensure that firms do not transact with sanctioned individuals and entities. Exchanges have complied to restrict access to sanctioned individuals, but they have stated that they will not impose a unilateral ban on all users.
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