He added: "We have developed this technology not to incriminate
nor to pry; but to support businesses’ anti-money laundering
obligations. Compliance officers can finally have peace of mind,
knowing that they have performed real, defensible diligence to
ascertain that their bitcoin holdings are not derived from the
proceeds of crime.”
Elliptic, a bitcoin analytics and storage startup based in London, thinks it's just made a huge breakthrough that could make banks way more interested in bitcoin.
Elliptic says its tool, built by four Ph.D. holders, can make a hugely accurate guess as to who each wallet belongs to — and it can do so in real time. Using machine-learning, its software crunches through the internet and the dark Web, skimming references to wallets and other digital clues to build up a picture of the owner.
A visualisation of the flow of money to and from Silk Road 2.0. Elliptic
That means banks have been wary about holding bitcoin — if they take a bitcoin that's just been earned selling drugs in a dark Web market like Silk Road 2.0, or that has passed through a known money-laundering service, they could end up in huge trouble with regulators.
Tom Robinson, Elliptic's cofounder, told Business Insider the tool could be a "game changer for the institutionalisation of bitcoin." If banks can satisfy anti-money-laundering regulation then they can start to think about handling bitcoin. The tool was created after conversations with dozens of lenders.
In an emailed statement on Thursday, Elliptic's CEO James Smith said “if digital currency is to take its legitimate place in the enterprise it inevitably must step out of the shadows of the dark web. Our technology allows us to trace historic and real-time flow, and represents the tipping point for enterprise adoption of bitcoin.
Later this year, the company will launch a API of its software, meaning banks will be able to effectively bolt it on to their existing systems and use it. Kevin Beardsley, an analyst at Elliptic, said around five banks have already signed up for the API. (He didn't say which ones.)
Dr James Smith, CEO of Elliptic. Elliptic
Bitcoin isn't untraceable — every transaction is recorded on a public ledger called the blockchain. But the digital wallets that carry out transactions are anonymous, making it extremely difficult to actually make sense of the data. You could do some digging around and make a guess, but it's hard and time-consuming.
Elliptic has released a visualisation tool showing the flow of bitcoin between entities over the entire six-year history of bitcoin, naming the 250 largest entities where bitcoins are sent to and from.
The company has created a sophisticated bit of software that it says can identify where a bitcoin has come from. That's a big deal for banks, which have a legal obligation to find out where the money they hold is coming from to ensure they're not holding proceeds of crime.
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