The Future of Blockchain Analytics: Challenges and Opportunities Ahead
As we approach the end of the year, it’s time to reflect on the state of blockchain analytics and what the future holds. We’ve all heard about the exciting possibilities of blockchain, from seamless cross-border payments to the rise of tokenized real-world assets and decentralized identity solutions.
But with great power comes great responsibility, and the industry is facing some significant challenges. The Year of DeFi Compliance
One of the biggest challenges on the horizon is DeFi compliance. With over 131 million DeFi users, regulators are taking notice, and it’s only a matter of time before we see stricter regulations.
We’ve already seen prominent cases like Uniswap Labs and Lido DAO facing penalties and lawsuits. The writing is on the wall: 2025 will be the year of DeFi compliance. But compliance is not just a matter of ticking boxes; it’s about ensuring that DeFi platforms are not used for illicit activities like money laundering and sanctions evasion.
The problem is that DeFi platforms are decentralized, making it difficult to determine where they are based, operate, or are registered. This lack of clarity makes it challenging to apply FATF standards, and the no-KYC, P2P transactions, cross-chain protocols, and privacy tools used in DeFi only add to the complexity.
The Cost of Compliance
As regulations increase, so do the costs of compliance. The alternative is risking hefty fines, damaged reputations, and business interruptions. We’re already seeing the impact of rising compliance costs, with two main drivers:
1. The surge in cybercrime: Crypto investment fraud losses reported to IC3 jumped 53% in 2023, and sanctions evasion incidents rose by 114% in the same year.
2. The growing workload on compliance officers: With more regulations to follow, compliance officers are under increasing pressure to ensure adherence to new requirements. This not only strains resources but also increases the risk of oversight errors. The Role of AI in Compliance
One potential solution to reducing compliance costs is the introduction of AI.
By automating simple tasks, AI can help compliance officers focus on more complex issues that require human judgment. However, AI is not yet ready to handle tasks that require nuanced decision-making, such as risk scoring. The Importance of Attribution Trust
One of the reasons AI is not yet ready for prime time is the lack of attribution trust.
Attribution trust refers to the confidence we have in the accuracy and reliability of data. In the context of blockchain analytics, attribution trust is critical, as it determines whether data can be used as evidence in court. The Need for Privacy
When it comes to trust, privacy is also essential.
Compliance activities must be kept confidential to prevent bad actors from exploiting information and covering their tracks. Using private servers is one solution to ensure that sensitive data remains under strict control. Conclusion
As we look to the future of blockchain analytics, it’s clear that there are significant challenges ahead.
But with the right approach, we can overcome these challenges and create a safer, more compliant industry. By introducing AI, prioritizing attribution trust, and ensuring privacy, we can build a more robust and trustworthy blockchain ecosystem. —
About the Author
Lex Fisun is the CEO and co-founder of Global Ledger, a Swiss company providing cryptocurrency AML risk analysis, blockchain forensics, and cybercrime investigation tools.
With a background in fintech, AI, and anti-fraud tech, Lex has worked with top global organizations, including the United Nations Office on Drugs and Crime and the Global Coalition to Fight Financial Crime.
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