The controversial crypto exchange Bittrex has implemented the real-time monitoring software for transactions of compliance firm Chainalysis in order to detect suspicious activity for its main supported cryptos.
The software is known as Chainalysis KYT (Know Your Transaction) and it will be applied to some of Bittrex’s supported coins, including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Dai, and Gemini.
The decision to implement Chainalysis KYT is no surprise, as many governments and supervisory bodies are taking actions to regulate crypto exchanges. The Financial Action Task Force (FATF) issued a new rule in June, to which the exchanges from its 37 member countries have 12 months comply. Several exchanges, including OKEx and UpBit have delisted their privacy coins due to FATF’s travel rule.
Though Bittrex already complied with similar U.S. regulations, Chief Compliance and Ethics Officer John Roth said Chainalysis KYT takes it a step further as it has a built-in knowledge base of suspicious addresses that will allow Bittrex to say one step ahead.
“Having real-time information coming in from which we can make risk decisions is really an amazing step forward, and frankly one that’s not available to traditional financial institutions,” said Roth.
Roth also stated that the new software complements the crypto space’s development and progress as financial institutions are looking into exchange-made trades.
“They need to be assured that we are doing things the right way.”
Chainalysis’ chief security officer, Jonathan Levin, said KYT systematizes most of the review process of Bittrex.
“The key to supporting a large exchange like Bittrex is building features that enable them to automate their compliance process, prioritize their workflow, and customize their alerts to speed up how fast they can do due diligence,” stated Levin.
By automating the procedure, high-volume exchanges can maintain compliance “sustainability”, meaning that they will still be able to identify a number of suspicious transactions from millions of regular crypto transactions.
The software will be able to pin down the transactions that are most likely to be of illicit nature, but a Bittrex-employed compliance analyst will still have to verify the threat before filing a suspicious activity report with regulators.
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