Intel exchanges have arrived – and with them a compliance dilemma.
This summer, a $670 bounty was paid on information identifying Elon Musk’s personal crypto wallet. The reward is offered through Arkham’s Intel Exchange, which launched in July and which critics have nicknamed “DOX-to-Earn.” The platform encourages users to reveal the identity behind otherwise anonymous blockchain addresses, with crypto payable in Arkham’s native token (ARKM).
Marina Khaustova is the CEO of Crystal Blockchain. Before Crystal, Marina was CMO and co-founder of Element Capital Group, a digital finance-focused investment bank and asset manager for emerging capital markets in the blockchain industry.
While all information is visible on-chain, public forums can be a questionable source of data and will require multiple verifications, including off-chain methods. Otherwise, wrong conclusions can be drawn, jeopardizing the integrity of blockchain analyzes and even legal systems.
As the blockchain industry matures, in addition to institutional adoption and regulatory clarity, analytics providers must ensure that studies are conducted carefully and with even more integrity. With consumer-facing analytics tools that allow any Twitter sleuth to play detective, the stakes are higher for the actors entrusted by government to investigate money laundering, fraud, and criminal activity with real national security implications.
All eyes on Blockchain’s surveyors
In an ironic twist, forensic firms – the teams tasked with quietly ensuring the integrity of decentralization – have been thrust into the spotlight. In April, a Dutch court allowed Alexey Pertsev, the developer of the Tornado Cash mixer who was sanctioned by the US government last year, to question Chainalaysis at trial later this year.
Pertsev’s lawyers have argued that on-chain Ethereum transactions cited in evidence did not exist, leaving a blockchain analytics firm in a grueling back-and-forth battle in which even one inconsistency could derail the state’s case , even if all other facts are rock solid. Furthermore, a hypothetical inconsistency could also be used in future legal defenses to undermine an entire process and an entire industry.
Read more: Arkham CEO Defends ‘DOX-to-Earn’ Program, Says Public Blockchains Are ‘Worst’ for Privacy
Companies or individuals who rely on public forums such as information sharing with opaque verification techniques. The industry should not use public authorities with public wallet addresses for compliance decisions.
Blockchain analytics providers have a huge responsibility to ensure their data is credible. Each analysis carries with it potential legal outcomes, and the possibility of changing someone’s life in the event of criminal charges by law enforcement. Just because blockchain transactions are public doesn’t mean it’s easy to make connections in the real world. Accepting any claim of ownership is not enough: a thorough check, both within and outside the chain, is required.
Inflection point
The blockchain industry is at an inflection point. The rise of information exchanges and ‘crypto bounties’ has the potential to spark a wave of digital hunting, even accelerating L2s and privacy coins. The problems information exchanges face are human rights issues, where their service is more like a publisher than a blockchain startup, and leadership will inevitably have to mediate on what should and should not exist on their platforms.
Forensic companies can correct this course by ensuring that audit trails are unquestionable in accuracy and integrity, reaffirming public trust in legal institutions and cryptocurrency as a tool for social good.