Chainalysis Finally Said It: Crypto AML Needs Standards

I'd call Chainalysis' post on blockchain analytics standards the most important crypto industry event of the month.

I've talked a lot about the problem it raises - and I'm far from the only one. The problem is the quality of address and transaction risk scoring in AML checkers. It hurts crypto swapping services like rabbit.io, and it hurts their users too.

Here's the example from the Chainalysis post. At a client's request, Chainalysis analyzed the origin of funds at a particular address and concluded that they were tied to gambling or betting. Another comparable company checked the same address for the same client - and concluded that the assets were linked to CSAM.

So which is it? Were the funds connected to betting winnings, or to the sale of child sexual abuse material? These are fundamentally different sources of funds, wouldn't you say?

People have been saying for ages that it's impossible to work normally with crypto when AML companies' risk assessments of the same address can differ this wildly. Now, finally, one of the giants of the scoring business is saying it too.

In its post, Chainalysis calls on the industry to establish standards for blockchain analytics, so that AML conclusions are reproducible, verifiable, and evidence-based - rather than resting on how similar a transaction pattern "looks."

This is how it should have worked from day one. Agree?

My only worry is that, for the foreseeable future, this may remain little more than a proposal. If only because Chainalysis is suggesting its own methodology as the baseline. Even if its competitors agree that the problem needs fixing, they'll almost certainly push for their own frameworks rather than a rival's.

Still, things are finally moving.