Chainalysis and other cryptocurrency risk and compliance firms like Elliptic and CipherTrace are benefiting from accelerated cybercurrency enforcement actions by U.S. regulators related to anti-money laundering (AML) concerns and national security.

With banks beginning to offer cryptocurrency to customers and cryptocurrency “going mainstream,” federal regulators will continue to increase enforcement efforts and the need for companies such as Chainalysis are likely to grow, Charles Subrt, senior analyst for fraud and AML at research and advisory firm Aite Group, told Bank Automation News.

Chainalysis’ data platform uses machine learning to automate risk, compliance and reporting functions — like know your customer measures and AML — related to cryptocurrency, and provides real-time information on blockchain transactions and the counterparties involved.

“Cryptocurrency is booming, and financial institutions are experiencing more demand for exposure to this asset class than ever before,” Philip Gradwell, chief economist for Chainalysis, told BAN. “Anyone making investment decisions — including banks, venture capital firms, and hedge funds — can now leverage our best-in-class data set and a team of experts to guide them.”

Chainalysis on Monday announced the launch of three subscription options to its new paid Market Intel product that provide real-time data on cryptocurrency transactions and market intelligence. Subscribers can manipulate datasets to test hypotheses and access comprehensive historical data on cryptocurrencies. Financial institutions can use on-chain data to research and execute cryptocurrency investment strategies. On-chain data is all data natively stored on the blockchain.

Chainalysis’ clients include financial institutions and governments, as well as cryptocurrency and cybersecurity companies. Co-founder and CEO Michael Gronager told BAN that the company’s banking and finance partners include Barclays, Ribbit Capital and Square. Chainalysis also has contracts with the DEA, the FBI, the SEC, Secret Services and other federal agencies, according to Bitcoin.com.

Banks face a real challenge in knowing who they are transacting with in cryptocurrency, Robin Henry, partner at the U.K.-based law firm Collyer Bristow, told BAN. Financial services regulators in the U.S. and U.K. have “begun to establish the guardrails that make payment services providers and other large fintechs more comfortable to begin diversifying into the cryptocurrency space,” he noted.

“Because any particular wallet’s whole transaction history is recorded on the public blockchain, firms can begin to build a risk profile and, to some extent, assess the level of danger associated with accepting cryptocurrency from that wallet,” Henry told BAN. “However, unless that wallet is linked to a regulated exchange that conducts rigorous [know your customer], the real-world entity behind the wallet can remain unknown. This means that firms are at a real risk of contravening U.S. and U.K. sanctions regulations.”

The risk and step up in enforcement appear to be helping Chainalysis’ bottom line. While the company would not provide specific details about sales or product breakdowns, Gradwell told BAN that it increased its “annual recurring revenue by about 100% year over year.

Not surprisingly, crypto compliance companies are also drawing investor interest. Chainalysis announced it had secured a $100 million Series E financing led by Coatue last week, bringing its valuation to $4.2 billion. Gronager told BAN the funding will be devoted to “building out the company’s data platform, covering more cryptocurrencies, focusing on emerging use cases like DeFi, and launching a global intelligence function, as well as continuing to invest in our software products and providing direct access to our data through APIs.”

Bank Automation News would like to know what our readers think about bots. We invite readers to take part in a short BAN reader survey.