LocalBitcoins is the latest digital currency marketplace to adopt blockchain analytics tools. The platform has started using Elliptic’s Navigator risk analysis tool and Lens wallet screener to deter criminals from using their marketplace.
A CipherTrace report indicated that LocalBitcoins received the most criminal funds in the first half of 2020—reportedly taking in over 99% of criminal funds in the first five months of the year.
Until September 2019, LocalBitcoins did not have any Know Your Customer or anti-money laundering safeguards in place. It’s also a peer-to-peer marketplace that connects an interested digital currency buyer with a seller; the company does not sell any digital currency itself. This made LocalBitcoins a prime location for criminals to offload their funds on unsuspecting buyers and allowed them to do so without verifying their identity. It also made it difficult for law enforcement officials to trace illicit transactions on the platform.
However, even though LocalBitcoins is still allegedly one of the most attractive digital currency marketplaces for criminals to liquidate their digital currency holdings, their implementation of KYC and AML procedures has reduced the total volume of criminal money flowing through the platform.
LocalBitcoins said it saw a 70% decrease in darknet transactions from September 2019 to May 2020 after implementing KYC and AML procedures.
Blockchain analytics software adoption
Blockchain analytic software is in high demand. In the past few weeks and months, we have seen the Ukraine Ministry of Finance, the U.S. Secret Service, and Internal Revenue Service (IRS) sign on to use a blockchain analytics platform.
Multiple reports indicate that cyber-crime involving digital currencies is on the rise. That being said, blockchain analytics software is a necessity for any digital currency marketplace or government agency that deals with finance or crime. Blockchain analytics software alerts its users when illicit transactions are taking place and when stolen money is on the move, which should deter criminals from using any platform that uses blockchain analytics software.
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