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March 22, 2023 marked 10 years of Elliptic and the day we introduced blockchain analytics. As the first firm to develop this game-changing technology and bring it to market, we are proud to see how it has helped the industry evolve over time and achieve effective compliance and regulation.
Thanks to Elliptic, blockchain analytics are now routinely used by the world’s leading compliance teams, law enforcement agencies and governments. We work with the world’s leading industry users – including Revolut, Metaco and Coinbase – giving them access to the best data and tools to reduce risk, while staying at the forefront of compliance innovation.
Elliptic is also heavily involved in policymaking in the global risk and compliance space. Regulators and industry leaders look to us for advice on what’s next, as we shape the future. But how did we get here?
This blog will take you through the journey so you can get there i know exactly how we created this new market, along with its evolution and impact on the cryptoasset space.
Ten years in the making
When the founders of Elliptic, dr. Tom Robinson, Ph.D. James Smith et al. Adam Joyce, first involved in cryptocurrencies in 2011, recognized the potential of blockchain to open up financial services to unprecedented competition and innovation. At that point, Bitcoin was only two years old and it will become our first focus as the industry evolves.
The founders’ experience working for regulated financial institutions also meant that they realized that if the crypto industry was to reach its potential in this new world, it would need to operate within a financial crime regulatory framework.
Elliptic was founded in October 2013, with the mission of creating the foundation of a financial system that is fairer, freer and safer for everyone.
The following year, the world’s first secured custody service for Bitcoin – Elliptic Vault – was launched. Elliptic then raised its first round of investment and embedded itself in the early crypto community.
Sometime around that time, however, it became clear that bad actors were increasingly using Bitcoin to support their crimes. This was particularly evident after the takedown of Dark Web marketplace Silk Road in October 2013 – the same month Elliptic was founded.
Silk Road – which allowed users to buy drugs and other illicit items with bitcoin and facilitated the illegal sale of more than $1 billion – was the first instance of large-scale crypto activity. It was pointed out that other legitimate actors in the ecosystem, such as exchanges, faced risks of exposure to illegal users of Bitcoin through transactions conducted on the blockchain.
In speaking with leaders of other early-stage companies such as Coinbase, Circle, Bitstamp and Gemini, Elliptic’s founders learned that a key requirement from US regulators was to ensure that cryptocurrencies entering their exchanges did not come from Silk Road’s successor Dark Web markets and other criminal undertakings.
Game-changing technology
This realization informed the development of Elliptic’s next product, which will change the world of cryptocurrency compliance forever. Our Elliptic AML Bitcoin transaction verification tool has eliminated the complexity of blockchain analytics, providing compliance professionals with a single, actionable risk score when evaluating their clients’ transactions.
Over time, the picture of illicit activities in cryptocurrencies has changed, and this has prompted us to develop our suite of products. In the short time since the collapse of the Silk Road, it has become clear that not only are dark web market operators using Bitcoin in their crimes, but so are hackers, fraudsters, credit card thieves, money launderers and other criminal actors. This required new solutions to detect and expose these risks. And we were ready to step up.
In December 2016, we launched Forensics crypto investigation software into our Anti-Money Laundering (AML) compliance suite. This meant that customers could leverage bitcoin forensics software to help compliance teams at banks and crypto companies build intelligence on criminal enterprises. Forensics has also been used by law enforcement agencies around the world to investigate increasingly complex cases of illegal cryptocurrency use.
This period also saw major evolutions in the regulatory environment that required new approaches to cryptocurrency compliance. In particular, in 2019, the Financial Action Task Force (FATF) published a guide on Virtual Assets and Virtual Asset Service Providers (VASPs) that raised the bar for compliance by establishing standards for the regulation of the crypto space worldwide. This has put additional pressure on VASPs – such as crypto exchanges – around the world to ensure ever stronger standards of regulatory compliance and risk management.
At the same time, the growth of the crypto space around this time meant that banks and other traditional financial institutions were increasingly influenced by cryptocurrencies. In some cases, banks have begun to explore launching their own cryptocurrency-related services, such as custody; in others, banks found they were exposed to VASPs and needed to be able to manage the associated risks.
Elliptic recognized the importance of addressing the challenges presented by this changing landscape. We were first to market again in December 2019 when we launched Elliptic Discovery, a VASP screening solution that enables banks to perform know-your-customer (KYC) checks and manage counterparty risks related to their interactions with VASPs.
Around this time, regulation of the crypto space began to spread across the globe, fueling the demand for cryptocurrency compliance solutions around the world. This then led us to establish a presence in Asia with the creation of our office in Singapore.
Fighting new threats
These changing dynamics continued to shape the evolution of cryptocurrency compliance well into the 2020s. The increasing use of financial sanctions measures in the US, particularly to target crimes such as ransomware, has created a need for screening capabilities that would allow commercial crypto exchanges and financial institutions to identify risks in the growing volume of transactions, without disrupting their ongoing business operations. increases rapidly.
That’s where we came in. In March 2020, we launched Elliptic Lens, a functionality that supports the screening and risk scoring of cryptoasset wallets.
Lens has provided an easier and more accurate way to perform due diligence on crypto wallets to prevent money laundering, sanctions compliance and combat fraud – before transactions take place. Using our best-in-class APIs, VASPs and financial institutions could now review crypto wallets at scale against our robust dataset, enabling them to ensure efficient and scalable compliance with sanctions and other regulatory requirements.
To ensure investigative capabilities can keep pace with these changing screening needs, in May 2022 we released Elliptic Investigator, an evolution of our earlier Forensic product. Elliptic Investigator is purpose-built to calculate the risk exposure of crypto addresses or wallets at scale.
By applying our unique and industry-leading dataset, the new Exposure Trail feature enables compliance teams to map connections between multiple entities and conduct far-reaching blockchain investigations with a single click. Law enforcement agencies can also use these capabilities to conduct investigations efficiently and reliably.
Cross chain growth
The way cryptoassets are used has changed dramatically in recent years. Individual digital assets and blockchains are no longer isolated systems, but have become part of a larger, interconnected crypto-economy.
This has been accelerated by new technologies such as decentralized exchanges and cross-bridges, which have removed many barriers between assets, allowing capital to flow freely and making cryptocurrencies more useful and valuable.
To combat this “multi-chain crime”, we have developed the next generation of blockchain analytics – known as Holistic Screening – which enables the tracking of crypto-assets between all blocks and assets simultaneously. This is done automatically and in milliseconds through our APIs, enabling businesses to view user activity at scale and drive efficient and effective compliance.
Our holistic screening goes beyond other current cross-chain analytics solutions available on the market today and includes additional key capabilities, enabling more accurate and efficient risk management and detection.
The future
Blockchain analytics has evolved dramatically over the past decade, and that evolution is sure to continue.
As the cryptoasset space changes at a rapid pace, and as regulatory developments occur, we will continue to strive to provide the leading solutions needed to manage risk and safeguard crypto security – with an emphasis on scalable, efficient verification solutions that enable our clients to know exactly the nature of the risks they face.
We track a whopping 98% of all cryptoasset trading volume and have collected over 100 billion data points – preventing rogue nation states and cybercriminals from using cryptoassets to hide their ill-gotten gains. We also boast the widest coverage of digital assets and blockchain available on the market.
Our verification, due diligence and investigative solutions mean that compliance teams and investigators can track and visualize the proceeds of crime across blocks and assets in real-time – helping you achieve the highest levels of risk detection.
Contact us to find out more.
Financial services in accordance with regulations
