In the next year, Blockchain Analytics Challenges analytics will encounter numerous obstacles, such as increasing expenses and worries about the reliability of attribution. Once again, we find ourselves at the end of the year, when the time for predictions begins. Much has been said about the promising future of blockchain technology, including the possibility of instantaneous international payments. The increasing value of tokenized assets (tokenized assets are now worth around $117.74 billion), and decentralized identification solutions (this market is predicted to reach $2 trillion by).
DeFi Faces Legal Scrutiny and Compliance
Authorities are already keeping an eye on DeFi. Notable cases include the SEC’s notification the CFTC’s $175,000 penalty for Uniswap Labs and the court’s designation of Lido DAO as a general partnership. Furthermore, the court ruled that the fact that the DAO is decentralized does not absolve. Identified members who are actively involved in running the DAO’s activities from responsibility.
The year 2025 will mark the beginning of DeFi compliance, so get ready, decentralized or not. And it must be completed. More than 131 million people have used DeFi. Criminals take advantage of loopholes in AML/CFT legislation, enforcement, and the technology underlying DeFi platforms to launder and move illicit cash.
Compliance expenses are on the rise
There are more rules to follow due to the increasing clarity of regulations, and compliance officers have a heavier burden due to having to make sure everyone follows the rules. Consider the cost of know-your-customer (KYC) checks alone: Twenty compliance personnel would be required to sort even one thousand warnings per month. Therefore, it is pointless for a company to accept a customer’s deposit of $100—or even $1,000—if the officer is required to check at least one alert pertaining to this consumer.
The compliance department does not make money; rather, it incurs expenses, which are then passed on to clients. Remember how Binance paid over $4 billion for AML and sanctions violations, and CZ got four months in prison? Non-compliance also carries the danger of fines and incarceration.
The increased workload puts a strain on resources and raises the likelihood of supervision mistakes. Missed warning signs, unfinished investigations, or erroneous risk assessments might result. The urgency with which thousands of transactions each day—each of which requires thorough analysis and documentation—must be processed.
Introducing artificial intelligence
One possible cost-cutting measure is implementing AI to automate routine operations that do not necessitate a compliance officer’s judgment. It can manage tasks such as answering frequently asked questions, allocating alerts to team members with the least workload, notifying certain compliance officials, etc.
However, risk rating and other jobs requiring human judgment are still beyond AI’s current capabilities. For the time being, it’s ideal to include it slowly for mundane activities, and anyone can join us to test AI in analytics.
Reliability assurance
The absence of attribution trust is one of the current barriers to AI’s application to significant problems. Two kinds of information might be mixed up, which is why it’s there. When it comes to attribution, only completely proof-based data can be trusted—data that is solid enough to be used as evidence in court.
Attribution can be rejected or contested in court in the absence of convincing evidence. As a result, the credibility of the entire cryptocurrency sector takes a hit, and enforcement efforts are weakened. People stop trusting Blockchain Analytics, and Challenges analytics companies if their attribution is wrong or can’t be verified. Regulators and respectable businesses may be wary of engaging with cryptocurrency if faith in it decreases.
Operational confidentiality
All parties involved, including the company, Blockchain Analytics Challenges, and law enforcement, must maintain this degree of secrecy. Protecting sensitive information enables law enforcement and regulators to conduct investigations undisturbed, preventing criminals from gaining a head start. Con artists and money launderers might use the information. Ro their advantage if word gets out that their activities are being reviewed. This would allow them to hide their tracks, remove evidence, or transfer the unlawful monies to another location.
One way to avoid this is to use private servers, which is what we do. As a result, the business, the police, and the regulators can carry out compliance operations without fear of leaks or illegal access. Servers like these keep critical information under lock and key, preventing criminals from learning about active investigations.
FAQs
How does the increasing clarity of regulations affect compliance costs?
The growing regulatory clarity results in more rules for compliance officers to manage, which increases costs for businesses. Compliance departments face a heavier burden to ensure everyone follows the regulations.
What is the role of AI in reducing compliance costs?
AI can automate routine tasks, such as managing alerts and answering frequently asked questions, helping to reduce the workload for compliance officers. However, human judgment is still required for more complex tasks.
Why is attribution trust important in blockchain analytics?
Attribution trust is crucial because inaccurate or unverifiable attribution data can lead to a loss of confidence in blockchain analytics and weaken enforcement efforts.
What steps can businesses take to ensure operational confidentiality in blockchain analytics?
To maintain confidentiality, businesses can use private servers to protect sensitive information and prevent criminals from gaining insights into ongoing investigations.
