Stablecoin issuer Tether has tapped Chainalysis, a New York-based blockchain analysis company, to bolster the compliance needs for its digital currency.
Announced on Wednesday, Tether will use Chainalysis’ know your transaction (KYT) solution with which it can monitor “large volumes of activity and identify high-risk transactions on an ongoing basis.”
The KYC solution will also allow Tether to understand the risk profile of each token holder, filtering them by the level of risk exposure to identify those that require the most immediate attention.
Commenting on the prospect, Jonathan Levin, co-founder and chief strategy officer at Chainalysis, said: “Stablecoins like Tether, which peg their value to other assets, were developed to appeal to mainstream audiences who are wary of the price volatility associated with many traditional cryptocurrencies.”
A controversial stablecoin
Despite being the leading USD-pegged digital currency with a market cap of around $4.6 billion, it is one of the controversial projects, primarily because of its opacity. Many raised questions about the value of its fiat chest, which are backing the stablecoin; however, the company was reluctant to conduct a third-party audit.
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“By putting proper AML transaction monitoring in place, Tether is demonstrating its commitment to transparency and regulatory compliance, further building trust among its growing user base,” Levin added.
The stablecoin company has integrated the API of Chainalysis’ KYT solution.
“Working with Chainalysis has allowed us to enhance our AML processes for all transactions involving the Tether token,” said Paolo Ardoino, chief technology officer at Tether, said. “This solution allows us to ensure a secure compliance program that fosters trust with regulators, law enforcement agencies and users. This is achieved without sharing our user’s identifying information, as such data is only kept on our servers.”
Meanwhile, Tether also launched a gold-pegged digital currency on two popular blockchains – Ethereum and Tether – Finance Magnates reported.