Here's a New Banking Tool for Vetting Crypto Exchanges

Blockchain forensics firm Elliptic is now offering banks a product that aims to provide up-to-date risk profiles of more than 200 of the largest crypto exchanges around the world.

AccessTimeIconDec 11, 2019 at 12:00 p.m. UTC
Updated Sep 13, 2021 at 11:47 a.m. UTC
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A risk-based approach rather than a blanket ban on crypto activity – that’s what blockchain forensics startup Elliptic is hoping to engender among banks with its latest offering.

“Most banks at the moment have a zero-tolerance approach to crypto,” said Tom Robinson, Elliptic’s chief scientist and co-founder. “They don’t have any visibility into the risks that a particular exchange may possess. They all look the same to them. So, many of them won’t bank any exchanges.”

The product, called Elliptic Discovery, aims to give institutions up-to-date risk profiles of more than 200 of the largest exchanges globally. 

Robinson says Elliptic’s tool offers risk indicators that matter to bankers: 

  • An exchange's know-your-customer and anti-money laundering policies
  • Jurisdictions that an exchange operates under and what licenses it holds
  • The coins listed at the exchange that might be risky (i.e. privacy coins)
  • Analysis of an exchange's transactions (i.e. funds going to anonymizing services or funds going to entities/countries on a sanctions list)

Similar banking products in the market include TRM Labs’ risk-score for cryptocurrency transactions, with the startup analyzing more than a dozen blockchains for banks looking to fight money-laundering and fraud in the crypto sphere. Banks have also used Chainalysis’ transaction-monitoring tools to be able to compliantly work with crypto firms. 

Elliptic’s Robinson said he spoke with about a dozen bankers to determine what risk indicators would be valuable to them. One insight gained from his informal survey was that bankers would be more likely to bank exchanges if they had more information about their risk profiles, he said.

The co-founder wouldn’t reveal the banks he contacted but Elliptic has publicly worked with crypto-friendly Silvergate Bank since the spring of 2017. 

Robinson believes banks are missing out on business opportunities to add clients and working against the will of their retail customers that are likely already purchasing and trading crypto without their bank’s knowledge. 

“I do think this is going to have a positive impact on the whole crypto system,” Robinson said. 

Last month, Elliptic began providing anti-money laundering services to the Zilliqa blockchain and cryptocurrency. In September, Elliptic closed a $23 million Series B funding round led by Japanese financial company SBI Holdings, which will help Elliptic expand in Asia. The company partnered with crypto exchange Binance in May.


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