JPMorgan Chase (JPM) announced on Monday that it would make a “strategic investment” in blockchain analytics company TRM Labs, becoming the latest of a growing number of Wall Street firms to expand their footprint in the sector. of cryptocurrency.
The analytics software used by TRM and others has become a staple for regulators and law enforcement looking to keep tabs on the flow of illicit crypto transactions. Last week, banking giant BNY Mellon announced that it would begin integrating similar analytics tools from Chainalysis.
JPMorgan’s investment “clearly underscores the importance of the growth of the crypto-economy and the importance of building trust and security in this ecosystem to support its growth,” said Esteban Castano, co-founder and CEO of TRM, in a press release.
While companies like Chainalysis, TRM Labs, and Elliptic work with a growing number of big names in the financial industry, most of their clients go undisclosed.
The United Nations Office on Drugs and Crime (UNDOC) as well as the Internal Revenue Service, UK fintech major Revolut and online broker Robinhood all use blockchain analytics to monitor crypto transactions.
Late last year, TRM announced a $60 million raise led by Tiger Global; it also included the venture capital arm of American Express (AXP), Visa (V) and the crypto venture capital firm, Castle Island Ventures.
TRM has carved out a niche for itself by tracing crypto flows on different blockchains, in particular the Solana (SOL-USD) blockchain. Its client list includes crypto depository bank Anchorage Digital, Circle, FTX.US, Moonpay, and Binance, among others.
JPMorgan CEO Jamie Dimon has been a vocal critic of the industry, but acknowledged the realities of a booming industry that customers want to get involved in. Earlier this month, the bank made a big splash into the metaverse by opening a virtual lounge on the cryptocurrency-powered virtual reality platform, Decentraland.
“Beyond illicit transactions”
Data suggests illicit flows into digital tokens have declined over the past year, even as total crypto market capitalization more than doubled to $1.7 trillion over the same period . Nonetheless, the emerging debate over crypto regulation, along with several high-profile fraud cases, has put the industry under the microscope.
While compliance and security remain the primary use for blockchain analytics, the potential of transaction monitoring tools provided by TRM and similar companies could be leveraged “beyond the problem of illicit transactions” according to Alkesh Shah, a global crypto and digital asset strategist with Bank of America.
He recently told Yahoo Finance that they “help provide a view of what’s going on in these blockchain ecosystems.” According to this premise, the software can give institutional investors a better view of which blockchains are “winning and which are losing,” he added.
TRM’s products help clients mitigate risk and meet anti-money laundering (AML) regulatory requirements. The company also offers a forensics-focused product that allows law enforcement to investigate specific crimes like theft or fraud that originate on a blockchain.
These tools have helped highlight the transparency of blockchain-powered financial transactions, such as in the Department of Justice’s efforts to seize $3.6 billion in Bitcoin stolen from crypto exchange Bitfinex in 2016, as well as many other surveys.
Umar Farooq, CEO of Onyx, JP Morgan’s blockchain platform for wholesale payments, said that “leading infrastructure companies like TRM will help usher in the future of secure blockchain use cases and of cryptography”.
David Hollerith covers cryptocurrency for Yahoo Finance. follow him @dshollers.
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