On January 15, blockchain analysis firm Chainalysis released an excerpt from its 2020 Crypto Crime Report.
Among the results, it found that exchanges Binance and Huobi received more than 50% of all cryptocurrencies laundered through over-the-counter (OTC) brokers in 2019.
While the report didn’t lay the blame exclusively on the exchanges, it implied that they needed more stringent KYC procedures.
After a period of silence on the matter, Binance CEO Changpeng Zhao (CZ) took to Twitter over the weekend to give his response.
CZ calls Chainalysis out for charging for its data
Clearly offended by the accusations in the report, CZ shifted the blame back onto Chainalysis. He said that if the firm didn’t charge for its data and made it publicly available, “that problem wouldn’t exist”.
He also added that Binance is a paying client of Chainalysis, but concluded: “I guess we don’t pay enough. Bad business etiquette for them to do this.”
Also knowing Chainalysis’ business is charging exchanges for this data. If they make that data publicly available, that problem wouldn’t exist.
We are a paying client for them too. I guess we don’t pay enough. Bad business etiquette for them to do this.
— CZ Binance (@cz_binance) January 18, 2020
In response to CZ’s angry tweet, one follower pointed out that Binance charges listing fees, to which he responded:
“Bad analogy. We don’t say bad things about projects who don’t apply for listing, or apply but don’t get listed.”
In the Chainalysis excerpt that Coin Rivet reported on last week, the analytics firm showed in great detail how exchanges Huobi and Binance had accepted illicit cryptocurrency funds through OTC brokers.
The report placed most of the blame on the illegally operating OTC brokers. It also argued that law enforcement agencies must take greater action.
However, the company also suggested that cryptocurrency exchanges needed to step up their KYC policies when dealing with OTC brokers (a fact that CZ clearly took exception to).
Chainalysis insists report ‘not aimed at Binance’
Chainalysis also took to Twitter in response. The company claimed that the purpose of its cryptocurrency crime research is to “shine a light on illicit activity and promote the good work of law enforcement and exchanges like Binance”.
The intelligence firm also said that the report was not aimed at Binance but instead intended to highlight “corrupt OTC brokers”, insisting that Binance was a “long-standing partner”.
— Chainalysis (@chainalysis) January 19, 2020
Should crypto crime data be free?
The Binance CEO slammed Chainalysis several times over its policy of charging exchanges for its data. He said that it was down to the company’s for-profit approach that so much laundering of cryptocurrency was possible.
Rather than naming and shaming exchanges through press releases, he argued the firm should simply publish the raw data.
It’s not really clear how useful this would be, however. After all, charging for data is Chainalysis’ core business model.
There are some free analytics firms like Etherscan that flag up illegal transactions. However, without companies like Chainalysis, there would be no one to analyse and interpret it.
For now, it seems, if companies want hard, useful data on cryptocurrency crime and its sources, they’ll need to pay.
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