CipherTrace’s tracking tool, Armada, will help banks better monitor crypto activity. Though such a service will protect financial institutions, it could have serious implications for crypto enthusiasts.


Key Takeaways

  • CipherTrace offers banks a suite of new AML and KYC tools to better monitor crypto activity.
  • U.S. regulators already have identified the potential for cryptocurrencies to be used for illicit activities.
  • Such tracking services may pose problems for Bitcoin’s fungibility characteristics.

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CipherTrace, a crypto-centric tracking service, has announced the launch of a new KYC and AML product. Called Armada, it arms banks and financial institutions with the tools needed to monitor previously undetected crypto transactions accurately. 

CipherTrace to Track $2 Billion in Undetected Crypto 

At current, many financial institutions lack the tools required to regulate crypto activity between their accounts adequately. 

CipherTrace estimates that this activity amounts to $2 billion in undetected transactions. Failing to identify the nature of these transactions poses a significant risk to banks. 

In an industry first, the office of the Comptroller of the Currency (OCCissued a New York bank a cease and desist order for failing to screen cryptocurrency-related activity. 

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The OCC stated that M.Y. Safra Bank’s lack of adequate monitors made it near impossible for federal regulators to identify suspicious activity. 

In a press release shared with Crypto Briefing, CipherTrace CEO, Dave Jevans, said:

“If M.Y. Safra Bank had deployed Armada to detect illegal cryptocurrency transactions, they would not be scrambling to meet the OCC’s requests. Though the OCC did not levy a fine, M.Y Safra Bank must implement an independent [Bank Secrecy Act/BSA] audit, monitor and report suspicious activity, institute an independent party to review past activities, and hire a BSA officer and sufficient supporting staff— all within 180 days.”

Armada is CipherTrace’s latest institutional tracking product. Banks using this tool will be able to identify any crypto-related activity associated with their services. 

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The tool can identify transactions related to virtual asset service providers and unregistered money service businesses. This list includes fiat onramps, exchanges, crypto custodians, and more. 

Financial institutions may find Armada interesting due to the heightened awareness of cryptocurrencies and digital assets. In March, the U.S. Treasury Secretary Steven Mnuchin announced that the American government would “not tolerate the use of cryptocurrencies in support of illicit activity.”

Defining this activity is unclear, and using such tracking services may limit Bitcon’s fungibility. This idea holds that one BTC is mutually interchangeable with any other BTC.

Like the U.S. dollar, the history of the bill plays no part in defining the value or worth of that bill today. Using CipherTrace’s Armada tool may disrupt this vital feature. 

If users who have received, unbeknownst to them, tainted BTC, they may be flagged and blocked by their bank. Ethereum enthusiasts raised similar concerns after Etherscan unveiled a similar tracking tool in April. 

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