Bloomberg | Olga Kharif | Jun 8, 2020

Key Points

• ConsenSys know-your-customer product will focus on DeFi
• Automated system will track 280,000 tokens issued on Ethereum

ConsenSys Inc., which is seeking to transform itself into a full-service software provider for the Ethereum network, is releasing an automated service for catching crypto’s bad guys.

Headed by one of Ethereum’s co-founders, Joseph Lubin, the New York-based company is rolling out a product focused on the know-your-customer regulatory compliance requirements that have proved to be a headache for many cryptocurrency firms.

“There are more and more people building decentralized apps that need this as a Lego piece,” said Lex Sokolin, an executive at ConsenSys in London. “What we are trying to do is make activity on the decentralized financial infrastructure much more safe, transparent, much easier to trace.”

With traditional payments, banks and companies like Visa Inc. keep a watch out for activities like money laundering. In cryptocurrency, know-your-customer policies have been varied and spotty -- a problem particularly as authorities are increasingly raising scrutiny.

See: 

• Could Bitcoin on DeFi displace banks? Yes

• Why DeFi’s Billion-Dollar Milestone Matters

• Podcast: When Currencies Fail: A Primer on the Dollar Crisis in Lebanon

Many crypto exchanges have hired third-party compliance and analytics providers such as Chainalysis Inc. and CipherTrace Inc. to help them determine if a particular customer and batch of coins may be related to hacks or criminal activity.

ConsenSys is entering the crowded compliance market hoping that its singular focus on just one digital-coin payment network -- Ethereum, where most tokens are issued -- will help. Ether, the second-largest cryptocurrency after Bitcoin, is the “native” currency of the decentralized platform.

ConsenSys will be able to analyze transactions relating to more than 280,000 coins that have been issued on Ethereum. It will focus on exchanges and so-called decentralized finance companies, which enable lending and borrowing and other financial functions by using automated software that have become known as smart contracts.

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