Top five blockchain analytics trends for 2025 | Opinion

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As a seasoned crypto investor with a decade of experience under my belt, I can confidently say that the future of blockchain analytics is both promising and challenging. The potential for seamless cross-border payments, tokenized assets, and decentralized identity solutions is undeniably exciting, but the looming specter of regulatory compliance casts a long shadow over these innovations.

In 2025, I believe we will see DeFi take a giant leap towards compliance. With the total number of DeFi users surpassing 131 million and criminals exploiting weaknesses in the system, it’s only a matter of time before regulators crack down. As someone who has seen Binance pay over $4 billion for AML and sanctions violations, I can tell you that non-compliance is not an option.

The challenge lies in applying FATF standards to DeFi, especially when it comes to determining where platforms are based, operate, or are registered. With its no KYC, P2P transactions, cross-chain protocols, and privacy tools, DeFi poses unique challenges for both regulators and analytics.

The best way to get a complaint handled is to not let it become public knowledge. Just like in my experience dealing with customer complaints back in my days at the car dealership, if they can’t complain, they can’t be mad! So, let’s keep our compliance activities under wraps and focus on building a brighter future for blockchain analytics.

In the approaching year, blockchain analysis may encounter a variety of obstacles such as escalating expenses and issues regarding credibility. As we near the end of this year, it’s prediction time once more. Over the past period, much has been said about the bright prospects of blockchain, ranging from the potential for hassle-free cross-border transactions to the surge of real-world assets tokenized (an estimated $117.74 billion worth as of now) and the development of decentralized identity systems (expected to reach a market value of $2 trillion by 2030).

Year of DeFi compliance 

Decentralized Finance (DeFi) has caught the attention of regulatory bodies. For instance, Uniswap Labs was issued a warning by the SEC and fined $175,000 by the CFTC. Similarly, Lido DAO was classified as a general partnership by the court. Furthermore, it was decided in court that those who actively manage the operations of a DAO, despite its decentralized nature, cannot evade responsibility.

Regardless of the decentralized nature of DeFi projects, brace yourselves – 2025 is expected to be the year when DeFi compliance becomes a necessity, and it’s crucial that this happens. The user base for DeFi has already reached over 131 million individuals. Unfortunately, criminal elements have found ways to abuse DeFi services by transferring and laundering illicit funds, taking advantage of vulnerabilities in the technology, enforcement, and Anti-Money Laundering (AML) / Countering Financing of Terrorism (CFT) regulations within these platforms.

The application of Financial Action Task Force (FATF) standards to Decentralized Finance (DeFi) is complex, primarily due to the difficulties in identifying where these platforms are located, conduct business, or are registered. The characteristics of DeFi, such as no Know Your Customer (KYC), peer-to-peer transactions, cross-chain protocols, and privacy tools, present unique challenges for regulators and analysts alike.

Increasing compliance costs 

As regulations become stricter, ensuring compliance becomes increasingly costly. The other option? Facing heavy penalties, tarnished reputations, and disruptions in business. This is yet another challenge we need to tackle, and we are already exploring solutions to handle this by accelerating our operational pace.

As regulatory guidelines become clearer, businesses face an increasing number of rules to abide by, leading to a significant increase in the workload for compliance teams who are responsible for ensuring adherence to these new stipulations. Processing around 1,000 alerts per month typically requires approximately 20 compliance officers, not counting the costs associated with Know Your Customer (KYC) checks. Consequently, a business may not benefit financially if a single officer must investigate even one alert for a customer who deposits as little as $100 or up to $1,000, given the potential time and resources invested in this process.

The compliance department doesn’t make money directly; instead, it uses funds and these expenses are shared among the clients. It’s also important to note that failing to comply with regulations can lead to financial penalties or even imprisonment. For instance, Binance had to pay a hefty fine of over $4 billion for violating AML and sanctions rules, and their CEO served four months in prison.

Under this heavy workload, our resources are stretched thin and the likelihood of mistakes due to oversight increases significantly. With the need to handle thousands of transactions every day, each demanding intricate examination and documentation, it’s easy to overlook warning signs, cut short investigations, or make inaccurate risk evaluations.

AI introduction 

One effective method for cutting expenses might involve integrating Artificial Intelligence (AI) to manage routine tasks that don’t call for a compliance officer’s judgment. For instance, it could be used to dispatch notifications to designated compliance officers or distribute alerts among team members with lighter workloads, respond to frequently asked questions, and so forth.

At this point, AI lacks the ability to make judgments like human risk scoring. Therefore, a prudent strategy would be to introduce it gradually for standard tasks, and we invite you to join us in testing AI in analytics.

Attribution trust 

One reason AI isn’t ready for significant applications is the challenge of establishing trustworthy attribution, which arises due to potential confusion between different types of data.

  • Instances where the data is 100% verified and reliable to be used in court. 
  • Cases where information comes from less trustworthy sources, for example, someone on X claiming some project is a scam. This type of data is not sufficient to seize funds or accuse a customer. Still, it can raise flags for compliance officers to investigate further.

To ensure credibility, it’s essential that only data backed by 100% indisputable evidence is trusted for attribution – the kind of proof strong enough to stand in a court of law. Lacking such concrete proof can lead to disputes or doubts about attribution in a courtroom. This uncertainty undermines enforcement efforts and tarnishes the crypto industry’s reputation. Inaccurate or unverified attribution erodes trust in blockchain analytics providers, potentially causing regulators and honest businesses to hesitate when interacting with cryptocurrencies.

Privacy of operations

Speaking about trust, maintaining privacy also plays a significant role. Confidentiality is essential when it comes to handling all compliance tasks, ensuring that the details of transactions under review remain hidden until the entire process has been completed.

Maintaining this degree of confidentiality is crucial not only for the company but also for regulatory bodies and law enforcement. Confidentiality enables these entities to conduct investigations without any disturbances, preventing potential wrongdoers from receiving early warnings. In case the details of ongoing reviews become public, unscrupulous individuals like fraudsters and money launderers might manipulate the information to hide their activities, destroy evidence, or transfer illicit funds to other locations.

Employing private servers as we do presents a sound approach to maintaining confidentiality. This setup allows companies, law enforcement, and regulators to manage compliance activities securely, without concerns over leaks or unauthorized access. With these servers, sensitive data remains tightly managed, thereby keeping potential wrongdoers in the dark about ongoing investigations.

Lex Fisun

Lex Fisun, being the CEO and co-founder, works at Global Ledger – a Swiss firm that offers AML risk analysis for cryptocurrencies, blockchain forensics, and tools for cybercrime investigations. Since 2015, Lex has been engaged in fintech, AI, and anti-fraud technology companies, eventually leading to the establishment of Global Ledger in 2019 due to heightened interest in crypto regulations. He has built relationships with prominent international organizations such as the United Nations Office on Drugs and Crime and the Global Coalition to Combat Financial Crime.

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2025-01-01 16:20