It has been known for some time that Bitcoin transactions are not really anonymous.
Now, a company focused on Blockchain surveillance has received significant venture capital funding, we read on The Telegraph website:
A British technology company that attempts to fight crime by spotting suspicious Bitcoin deals has raised $5m (£3.5m) as banks and regulators begin to take the blockchain technology that backs up the virtual currency seriously.
London-based Elliptic claims to help solve one of the biggest challenges of Bitcoin for companies that use it – the inherent anonymity, which means banks are reluctant to embrace it for fear of falling foul of anti-money laundering regulation.
Dr James Smith, one of Elliptic’s three co-founders, said its software, which uses artificial intelligence to scan the Bitcoin network, makes it easier to identify patterns of suspicious behaviour and trace it back to the source. It is already widely used by online exchanges and law enforcement to detect potential money laundering, and has processed around $2bn in Bitcoin transactions.
Paladin Capital, a US-based investor with close connections to the U.S. government, led the investment. Kenneth Minihan, a former director of the US National Security Agency who is now a managing director at Paladin, said: “Elliptic is a game-changer for blockchain and is already trusted by some of the smartest minds in law enforcement and compliance. The firm’s monitoring capability will be an essential component of any blockchain in the future and we will help Elliptic to expand in the United States, via our contacts and knowledge of U.S. law enforcement and government agencies.”
Bitcoin has never really been anonymous, to start with. Actually, the fact that all transactions are recorded in a public ledger seems to make Bitcoin surveillance not so big a problem. This is not the first time we actually hear about the possibility to analyze various transactions, but it might be the first highly-publicized professional attempt to tackle the subject.
The way Bitcoin is set up makes it relatively easy to track transactions, but not necessarily easy to discover who is behind them—at least not always. Elliptic seems to be focused on discovering patterns in the Bitcoin data which could identify potentially fraudulent transactions. We’ll still have to see whether this evolves into an AML system. For the time being, it seems that financial institutions are very much interested in the possibility to have tools identifying potentially suspicious transactions. This could make Bitcoin-based systems more attractive to them, ceteris paribus.
For now, let’s focus on the charts.