In light of global trade restrictions against Russia, Chainalysis has introduced two new tools for helping businesses ensure that they don’t interact with sanctioned entities through blockchain.
Enforcing Sanctions in Crypto
The first of these tools – according to a statement from the company – is an on-chain oracle. The smart contract will store data from economic embargo lists provided by various western authorities like the US, EU, or United Nations. The oracle may be easily called by other smart contracts to validate any blockchain wallet before interacting with it. This tool was released yesterday.
The second tool – an API tool for web/mobile user interfaces – will source the same data for validating wallets, and is expected to be released next month.
Chainalysis made clear its support of Ukraine over Russia in the recent conflict, emphasizing the crypto industry’s need to be on “the right side”. As such, its new tools are free to use.
“These innovations are available to both good and bad actors,” said the company regarding blockchain technology. “While the industry celebrates the Ukrainian government’s successful fundraise, we’ve also heard concerns about the potential for cryptocurrency to be used by sanctioned entities and individuals in Russia for sanctions evasion.”
The tools are specifically directed towards web 3 applications like decentralized exchanges, which “do not have the lightweight solutions they need to comply with sanctions policies.”
Indeed, KYC and AML requirements may soon even come to the world of Defi. As part of Avalanche’s recent incentives program, it plans to build a subnet that is built-in with KYC functionality.
Crypto: Helping Ukraine or Russia?
Cryptocurrencies facilitate peer-to-peer long-distance transactions. This has made them effective for international fundraising campaigns ranging from Canada’s Trucker Convoy to Ukraine’s Military Defence.
However, concerns are rising among politicians that Russians may also use them to work around trade restrictions. This has prompted extreme calls on crypto exchanges to stop servicing all Russian accounts, which the companies hesitated to follow.
However, where exchanges have been legally required to sanction specific entities, they have complied. Other industry players – such as Ethereum mining pool “Flexpool” – have individually decided to cease service to Russia.
Overall, the crypto community has been quite generous with its support for Ukraine, which has received tens of millions of dollars in Bitcoin, Ether, Dogecoin, and more.