The Crypto Community Must Use the Blockchain to Self-Police

Self-policing illicit activity on the blockchain may soon be a necessity for the cryptocurrency space.

One can also expect that blockchain forensics tools will become more valuable and more widely deployed as crypto exchanges aim to lessen the risk of transacting with users with tainted coins.

The more significant part of a new era arising from financial authorities scrutinizing cryptocurrency addresses is going to be what the cryptocurrency community itself will have to do: Work to prevent illicit transactions on the blockchain.

Cryptocurrency firms to go beyond doing the "Know your customer" due diligence required of traditional financial institutions and do "Know your transaction" analysis by leveraging data on the blockchain.

Specializing in such blockchain forensics, serving crypto exchanges along with other enterprise customers like law enforcement agencies and large banks.

An inadvertent transaction with a banned address or an address that has transacted with a banned address would be viewable on the public blockchain ledger, possibly tainting that person's cryptocurrency wallet as well.

The only way to help everyday users of cryptocurrency navigate the maze of an SDN-laden blockchain platform would be having real-time AML/KYT insight into the funding flows.

Besides incorporating OFAC's blacklist, a public crowdsourced blockchain AML tool could address an illicit finance threat that affects crypto users directly: crypto heists.

With all the attention, time, and money invested in new products and services built off of cryptocurrency tokens, those who are developing this technology should be able to design ways to incentivize keeping the blockchain clean.

CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.