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  • J McGlynn and M Bacina

Chainalysis code to catch and keep captive seized digital assets

Updated: Oct 4, 2021

Recently, blockchain analysis firm Chainalysis announced it was launching a program designed to manage and store cryptocurrency seized during criminal investigations.

Coining it an “asset realisation program”, Chainalysis explained that its new software will empower law enforcement agencies to handle, hold, and track seized assets, including cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and other "alt coins".

While traditional bank accounts can be frozen when criminal conduct is suspected, digital currencies have been more of a challenge, since decentralised currencies have no central institution who can impose a freeze, leading to investigative and legal challenges for law enforcement and Courts when disputes or seizures of digital assets arise. Law enforcement agencies in particular are not necessarily funded adequately to address cutting edge technology and even the storage and custody risks of seizing a digital wallet can be problematic given that anyone with a copy of a private key can move the tokens in the wallet to which the private key relates.

In other words, Chainalysis’s program is offering a solution to a virtual coin gray area which presents the company with a specialised niche and valuable business opportunity.

Chainalysis is filling a gap in the market

In its 12 November announcement, the company whittled down its value proposition in as many words as:

When law enforcement discovers and investigates illicit cryptocurrency assets, they need to seize and store them until they can be legally forfeited. As such, government agencies and insolvency practitioners -- licensed professionals who advise on insolvency matters -- need a safe way to track, store, and ultimately sell seized cryptocurrency assets for fiat currency.

Jason Bonds, CRO of Chainalysis, also pitched in to assert the program's growing value, saying:

As cryptocurrencies become more mainstream, they will increasingly be used by good and bad actors alike. Chainalysis is dedicated to building trust in digital assets, and that means helping to detect and investigate illicit activity. As our government partners become more successful in rooting out bad actors, assisting them with asset recovery and realization is a natural next step.

Right now there seems no greater time for Chainalysis to champion its new program, seen in the US government's announcement they had seized BTC worth $1 billion in the largest confiscation of digital coins recorded to date.

Chainalysis was involved in that investigation as well as the recent Welcome to Video take down, works with the US agency FinCen to investigate financial crimes, and has been involved in other recent probes into North Korean hacking activities and terrorism financing.

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