Malta is turning to a crypto startup CipherTrace for technical assistance in combating the risk of financial crimes in its industry of licensed digital assets.
Malta Financial Services Authority (MFSA) announced on March 11 that it will integrate CipherTrace product to monitor compliance with the requirements for "protecting consumers, investors and business partners."
According to the CipherTrace website, the tool uses blockchain analytics and forensics to search for “suspicious” addresses and wallets. The firm says that it profiles cryptocurrency exchanges, ATMs, coin acceptors and money laundering systems, as well as well-known criminal addresses to evaluate transactions and measure the level of risk.
Machine learning and analytics are used to assess transaction risk based on actions associated with specified addresses and wallets. The MFSA said the system also anonymizes the blockchain addresses, which allows regulators to “evaluate and monitor the reliability of the virtual assets business.”
MFSA CEO Joseph Kushieri said:
“Being deeply aware of the risks of money laundering and terrorist financing related to organizations operating in this area, it was decided to use the services of CipherTrace in order to reduce fraud and identify transactions with illegal sources of funds.”
CipherTrace said in an email that the integration will provide risk ratings for Malta's crypto operators in order to “evaluate their reliability and constantly monitor their compliance.”
The MFSA will track the risks associated with the digital assets business, including cryptocurrency exchanges, collective investment schemes and initial coin offers (ICO).
“A cryptocurrency business often has difficulty establishing trust and maintaining banking relationships because of their perceived risk,” said Dave Jevans, CEO of CipherTrace.
CipherTrace tools can help financial institutions decide which cryptographic businesses to trust and avoid reducing the number of “valuable customers,” he added.
The company has raised $ 15 million from investors, including Mike Novograts's Galaxy Digital.