During the 2017 cryptocurrency market bull run, when Bitcoin came to the forefront of the public’s eye, many traditional finance figures had labeled it as being “associated with drug smuggling” and other nefarious activities, despite Coinfirm finding only 1.2% of wallets being associated with darknet markets.
Fast forward to 2020, the FinCEN Files uncovered and detailed systematic AML, KYC and CFT compliance issues in the traditional financial system. Meanwhile, Bitcoin was embraced by financial institutions in 2020 from the largest fund managers to payment processing giants Visa and PayPal.
Not long after those firms’ announced their intentions to join the crypto sphere, BTC has reached an all-time high of $29,000 on December 31st. Data analysis revealed that the average transaction size of BTC in 2020 was $52,701.29 vs. 2019’s $32,696.38 – a 61.18% jump. Coupled with the fact that the number of transactions on the BTC chain declined, this is a sure sign of institutional demand. Lower numbers of transactions, higher values of.
This marked a tectonic shift in the viewpoint of cryptocurrencies from traditional finance and this year Coinfirm partnered with some of the biggest custodians and FinTech innovators including; Eterbase, Finoa, IOV Labs, GamerHash, Infinigold, Nash, RIDDLE&CODE, Bankhaus von der Heydt, Bitexen, spot9 and Mandala.
Coinfirm currently counts 200+ clients on its platform and generated over 50 million risk reports this year alone. We raised more than 4 million USD in an institutional round of financing in January, followed by Middlegame Ventures investing 2 million EUR in Q3.
Major stablecoins also saw triple digits increases in usage, leading central bankers to counter threats of legislation and double down efforts into Central Bank Digital Currency (CBDC) projects. The ‘Sand Dollar’ in the Bahamas was the first (and only) official CBDC to be ‘fully’ rolled out this year in October.
As the COVID-19 pandemic swept across the world and stay-at-home orders came down from governments, criminals used this to their advantage to prey on the digitally naive. Ransomware, fraud and other forms of cybercrime increased in leaps and bounds – with cases of ransomware doubling in 2020 and Coinfirm’s Reclaim Crypto fraud victim service experiencing heightened demand.
Even high-profile individuals were not immune as Elon Musk, Barack Obama, Bill Gates, Jeff Bezos, Michael Bloomberg, Warren Buffett and Kim Kardashian’s Twitter accounts were compromised by a hacker demanding payment in Bitcoin.
Coinfirm shifted to becoming a remote-first organization and successfully partook in a number of online hackathons and webinars, winning 1st prize at the European FinTech Hackcelerator 2020 in the RegTech category and pitched at the finals at the Global Fintech Hackcelerator, hosted by the Singapore FinTech Festival, the theme of which was “responding to a global pandemic”.
2020 was the year that regulators became far savvier to the nuances of blockchain and the crypto market with a plethora of legislation coming into force.
The EU’s 5AMLD was rolled out across Europe which noted cryptocurrencies for the first time and set crypto-based businesses as ‘obliged entities’, the UK’s FCA banned crypto derivatives and extended the crypto business registration deadline. Lithuania revoked 1,000 licences.
This year also saw Coinfirm launch the all-in-one FATF Travel Rule Solution, join the OpenVASP Association to develop an open protocol to implement FATF’s Travel Rule for virtual assets and unite with the ATCC to combat human trafficking.
In North America, the SEC’s Ripple case of XRP being a security sent it tumbling after large exchanges froze deposits and trading whilst FinCEN targeted self-hosted wallets KYC requirements. In South America, Venezuela encouraged mining while taking out exchanges to discourage remittances from the hyperinflation suffering state.
Coinfirm was brought onto the infamous QuadrigaCX case with our strategic partner Kroll, a division of Duff and Phelps and industry-renowned crypto lawyer David Silver joined the Coinfirm board to further the fight against fraudsters.
Meanwhile, in Africa, Nigeria and South Africa set out legal definitions to various crypto assets for investor’s security as Kenya eyed up a potential CBDC.
An investigation by Coinfirm found that vast amounts of illicit funds had been overlooked by authorities in the Silk Road case, and a further investigation found that nearly $1 billion was missed by sanctions lists.
Over in Asia, China rolled out the Digital Yuan, Thailand’s tax authority deployed blockchain and South Korea banned privacy coins.
The year saw an explosion in DeFi protocols with Total Value Locked jumping from more than $650 million to nearly $14 billion Year-to-Date, a 2000%+ increase. However, due to the nature of the DeFi market being very young, there is so far no regulation of this sector and many DEXs or ‘decentralized exchanges’ have zero AML procedures in place.
Coinfirm’s analysis of 2020 vs. 2019 found that the velocity (how many transactions occurred on-chain) of ETH – the blockchain where the majority of DeFi projects are run – increased by 31.93%, whilst BTC’s declined by -10.51%, in a sign that more whales were ‘HODLing’ after this year’s halving.
In response to this “Wild West” Coinfirm released the AMLT Oracle for AML/KYC compliance for decentralized finance. Coinfirm’s AML & Analytics platform partnered with DeFi protocol WAVES and Tezos as we integrated Chainlink for the new AMLT Oracle DeFi compliance solution.
Borrowing and lending were not the only markets to be redesigned – NFTs (Non-Fungible Tokens) using the ERC-721 and ERC-1155 token standards have made a comeback as digital assets and data opportunities were explored.
Speaking of digital data, major European insurance provider Link4 integrated Coinfirm’s digital asset provenance platform Trudatum to the benefit of millions of users, whilst Trudatum itself became a globally recognized patented technology. That was not the only recognition Coinfirm gained as we were named one of the ‘Future of Blockchain’ companies in the UK and one of the ‘Blockchain 50’ global organizations in 2020 by Beauhurst and CB INSIGHTS respectively.
Coinfirm has added even more blockchain analytics coverage in 2020 – by covering 1,500+ coins, tokens and protocols Coinfirm’s AML platform now covers 97% of the blockchain ecosystem by market cap. This year also saw the AML Platform add the Blockchain Browser and Case Management to its RegTech stack.