Elliptic raises $ 23 million to fight cryptocurrency crime

James Smith of Elliptic talks during an event in New York City.

John Lamparski | WireImage | Getty Images

When Hamas tried to obtain bitcoin by funneling it through a series of digital wallets, a startup could see what was going on and alert customers.

Based in London, Elliptic blockchain analytics sells tools to some of the world's largest cryptocurrency platforms – including Binance and Circle ̵[ads1]1; as well as banks. The company's software is used to investigate criminal activity on bitcoin's digital ledger and monitor transactions to prevent money laundering.

The company recently learned that Al-Qassam Brigades, the military wing of Hamas, used a donation site that generated a different bitcoin wallet address for each person who visited. This made it more difficult to track the funds and see where they were sent. The group has been designated as a terrorist organization by Israel, the United States and the EU.

"Because we are always on top of what is happening, we can see when these funds start moving to stock exchanges," Elliptic co-founder and CEO James Smith told CNBC in a telephone interview. "We were able to tell our customers that these funds were coming towards them and they were able to stop them."

aggressive expansion to Asia. SBI, a financial services business spun off from SoftBank, has made headlines lately due to partnerships with blockchain companies such as Ripple and R3. Elliptic also considers the Spanish bank Santander an investor.

Terrorist financing is just one area of ‚Äč‚Äčillegal activity the firm's platform is working on. It is also used to track people trafficking in child pornography and drugs, as well as hacks that result in money being stolen. Elliptic shows another side of the crypto industry, in that technology is seen as more favorable to financial services and regulators.

& # 39; It's out of the box & # 39;

Smith said the cryptocurrency industry has seen more growth in the last 18 months than it has in previous years. Bitcoin's publicity has more than doubled in value since the start of the year and Facebook announced plans to launch a virtual-backed virtual currency called Libra, in collaboration with other technology and finance companies.

But the weight has been met with fierce regulatory pushback. President Donald Trump has said that Facebook may be required to apply for a banking license to launch it, while several US lawmakers have been panning the company's digital currency plans. Central bankers have also poured cold water on the idea, with Federal Reserve chairman Jerome Powell saying the project should be halted until regulators' concerns are addressed.

The manager of Elliptic said that even though Facebook "is taking a toll," there are many other companies investigating virtual currencies that are backed by assets. "It's outside the box," he said. "People are thinking about this now, and what's the right way to do it." Even central bankers are flooding the idea, and Bank of England Governor Mark Carney is proposing a digital currency and a China central bank claims it is close to releasing its virtual symbols.

Elliptic will open offices in Singapore and Japan in the future as part of a push into the Asian market. Japan is an example of a country that has shown more progress in the industry than others, Smith said, with "big banks" exploring ways to provide cryptocurrency services to their customers. The company said that revenue in Asia has increased ten-fold in just the last 12 months.

Elliptic said it would also use the fresh funds to further develop its product to support new digital currencies including Libra, Link – a symbol developed by Japan's Line Corporation – and central bank cryptocurrency.

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