Feeding off the Government Chainalysis’ Crypto Business

With 9 funding rounds and a $4.2 billion valuation, what makes Chainalysis so popular with capital and governments?

In 2014, Mt. Gox crashed, stealing nearly 8.85 million bitcoins and eventually declaring bankruptcy.

As an early landmark risk event in the cryptocurrency industry, the Mt.

On October 1st of that year, Michael Gronager, former COO of Kraken Exchange, and others co-founded Chainalysis, a blockchain data tracking platform, and helped the U.S. government pinpoint the whereabouts of some of the stolen bitcoins.

As a result, Chainalysis has been dubbed the “FBI on a chain” by the industry.

Recently (June 24), Chainalysis closed a $100 million Series E round of funding at a valuation of $4.2 billion.

As a cryptocurrency-related company, Chainalysis has been living off the government, and with regulation and compliance becoming a major trend, Chainalysis is getting more and more attention from capital. ……

“9 rounds of financing, $4.2 billion valuation

Chainalysis’ funding history dates back to 2015.

Crunchbase data shows that since its inception, Chainalysis has completed a total of nine rounds of funding, with the exception of the first seed round of funding for an unknown amount, the remaining eight rounds of funding, Chainalysis raised a total of $366 million.

Among the nine fundraising rounds, the strength of the institutions involved in Chainalysis’ investment is extraordinary, including Benchmark, which led the investment in Uber and reaped 600 times return, Coatue, which has successively laid out famous domestic Internet companies such as Xi Cha, Drip Travel and Byte Jump, and Paradigm, which has extensively laid out the cryptocurrency industry and invested in more than 20 startups.

Prior to the $100 million Series E round, Chainalysis just completed a $100 million Series D round on March 26 this year with a valuation of over $2 billion.

In just 3 months, Chainalysis has doubled its valuation. And the current valuation is up 4x compared to the $1 billion valuation in 2019.

Feeding off the Government Chainalysis' Crypto Business

Chainalysis’s 9 funding rounds, source: Crunchbase

With each funding round, Chainalysis has expanded its business footprint even further.

In 2018, after completing a $16 million Series A funding round, Chainalysis went along with the launch of a cryptocurrency compliance tool called Chainalysis KYT (Know Your Transactions), which provides real-time transaction analysis.

In 2019, after completing a $36 million Series B funding round, it began a major push into the Asia-Pacific market.

This time, after closing a $100 million Series E round, Chainalysis then synchronized its open recruitment for hundreds of new positions globally to recruit and expand its team.

From the business level, Chainalysis has formed a complete blockchain service matrix with three core products, Chainalysis Reactor, Chainalysis KYT, and Chainalysis Kryptos, and has launched Chainalysis Data.

Among them, Chainalysis Reactor is the investigation software for tracking the flow of money on the blockchain. Through address tagging, activities on the blockchain are united with the real world to help track and investigate criminal activities.

And Chainalysis KYT is an automated cryptocurrency transaction monitoring software.

Chainalysis Kryptos is an industry analysis software provided for institutional service providers.

Chainalysis Data, on the other hand, can provide customized services for blockchain data needs.

Through the continuous construction of its own product system, Chainalysis’ business scope now covers various directions such as data monitoring and consulting analysis, and its target customers include not only government and commercial organizations, but also the general users.

In 2021, Chainalysis, with its ever-improving ecology and rising valuation, is ranked among the 2021 Forbes FinTech 50, together with blockchain companies such as BlcokFi and Paxo.

And Jonathan Levin, one of the founders of Chainalysis, was also named to Fortune’s list of the world’s 40 under 40 financial elite last year.

“We always overestimate the changes that will happen in the next two years and underestimate the changes that will happen in the next ten years.” This is a quote that Jonathan Levin, co-founder of Chainalysis, holds in high esteem.

The cryptocurrency market is weathered in many ways, and in Jonathan’s view, it seems inevitable that it will eventually move towards compliance and regulation.

This is why Chainalysis was created in the first place.

Chainalysis was founded on October 1, 2014, when the company’s business covered: governments, financial institutions, and cryptocurrency exchanges, providing services such as bitcoin transaction analysis software to help clients comply with compliance requirements, assess risk, and identify illegal activity.

Chainalysis became an official U.S. government-authorized assistance agency due to its outstanding performance in the Mt.

Since then, Chainalysis has been making new achievements in the fight against cryptocurrency crime, making this blockchain analysis company, founded in 2014, more and more popular with the government and capital.

Government Trust, Capital Favor

Why did capital choose Chainalysis?

“When I first spoke with Michael, the CEO of Chainalysis, I realized that what Chainalysis was doing was much bigger than I had previously anticipated.”

In a question on Quora about Chainalysis, Benchmark, the lead investor in the Series A round, explained why it chose Chainalysis: compliance issues had to be addressed to achieve growth.

Today, more and more traditional institutions are looking to participate in the growing cryptocurrency ecosystem today, but are afraid of regulatory uncertainty.

This pain point is precisely the opportunity for Chainalysis to grow, by building a bridge between the free world of cryptocurrencies and the regulated world of fiat currencies, thus allowing more people, wealth, and capital to enter the cryptocurrency space with peace of mind.

In addition, the composition of Chainalysis’ team also shows its strength in cryptocurrency and financial risk control to the outside world.

Chainalysis CEO Michael was previously the COO of Kraken Exchange, and CTO Jan Moller earlier served as the chief engineer of Mycelium, a cryptocurrency wallet.

In addition, the technical advisor who joined the Chainalysis team in June 2019 has a resume of working in positions at the U.S. Department of Justice, the U.S. Treasury Department’s Financial Crimes Enforcement Network, and the Treasury Department’s Office of Foreign Assets Control.

Jesse Spiro, who is responsible for Chainalysis’ global policy, also has a long history of working for various financial investment and risk control firms.

Team members from various fields come together from all over the world and bring their experience and connections to Chainalysis.

In 2015, Chainalysis signed with the FBI to take its first deal, with a contract amount of just $9,000.

Over the next five years, Chainalysis took one step at a time and gradually gained the trust of government agencies with several outstanding investigative follow-ups.

In 2017, a Florida woman died from an overdose of fentanyl-like drugs (opioids) purchased from the dark web. This drew the attention of the U.S. Drug Enforcement Administration (DEA), which launched an investigation into the case.

Since most drug dealers on the dark web use cryptocurrencies to trade, U.S. authorities chose to use Chainalysis to track and eventually identify the true identity of the criminals to catch them.

Not coincidentally, in October 2019, the U.S. Department of Justice used Chainalysis’ services to eventually shut down WTV, one of the world’s largest child pornography sites, capturing hundreds of criminals and rescuing 23 children.

With the rapid growth of the cryptocurrency industry in recent years, the tentacles of cryptocurrency are stretching throughout the world, and the criminal activities associated with it are becoming more and more common.

The importance of Chainalysis in combating smuggling, drug trafficking, and economic fraud with the help of cryptocurrencies is becoming more and more prominent, which makes Chainalysis increasingly popular among government departments.

Some statistics show that the amount of cooperation between the U.S. government and Chainalysis, in 2019, exceeded $5 million, which is a 20% increase compared to 2018, but a 22,558% increase compared to 2015.

Today, Chainalysis’ U.S. government clients include not only the usual familiar departments like the FBI, SEC, and CFTC, but also the U.S. Drug Enforcement Administration, the U.S. Transportation Security Administration, and the U.S. Air Force, to name a few.

Even Reuters and Bloomberg, one of the world’s four major news agencies, have begun to frequently cite Chainalysis data in their reports.

In short, with good business capabilities, a well-developed product system and close relationships with government departments, it is not surprising that Chainalysis is favored by capital.

Chainalysis’ growth prospects in the context of regulation and compliance

Chainalysis has faced criticism as it has grown and developed.

To some, as a cryptocurrency native, the Chainalysis business itself and its close relationship with the government more or less runs counter to the spirit of the blockchain.

“A company like this is unethical.”

On April 28 of this year, Bitcoin security expert Andreas Antonopoulos publicly criticized Chainalysis for being directly or indirectly providing information about millions of citizens to the world’s worst dictators and regimes.

Additionally, in 2019, Chainalysis was accused by the crypto community when it was revealed that it allegedly shared users’ personal data with Coinbase.

Although Chainalysis subsequently responded by stating that it only had access to users’ transaction data, and not to their personal information.

But this explanation, at the time, was not accepted by many people.

Today is a different time.

In the last two years, the entire cryptocurrency space has been on the fast track of development.

In the midst of a global deflation and severe inflation, many institutions and capitals are putting bitcoin on their balance sheets to diversify their asset allocation and fight inflation.

There are MicroStrategy and Tesla plunging to the bottom, followed by Meitu and Nexon picking up high positions, and what’s more, U.S. pension providers are also investing 5% of their portfolios in cryptocurrencies, and even investors from the original stock market funds, commodities, and futures crude oil fields have entered to join the wave.

However, at the same time, there has been an exponential increase in various security incidents in the industry, whether it is the frequent hacks in the DeFi space or the recent world sensation of the hacking of the US East Coast pipeline system and the extortion of Bitcoin.

All kinds of security incidents are seriously threatening the asset security of organizations and businesses that are admitted to cryptocurrencies.

Some data shows that there have been 426 security incidents in the industry to date, with losses of nearly $15 billion. In 2020 alone, the blockchain ecosystem has been the subject of 122 publicized security incidents: 54 smart contract and token security incidents, 29 exchange security incidents, 12 public chain attacks, 12 wallet attacks, and 15 other attacks.

Add to that the tightening of global regulation.

As a blockchain analytics company that started by working with governments and is committed to embracing compliance and helping to fight crime, Chainalysis may have even more room to grow now and in the future when regulation and compliance become industry trends.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/feeding-off-the-government-chainalysis-crypto-business/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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