U.S. government agencies’ three-fold increase in blockchain analysis service spending for three years, reaching nearly $10 million

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  • So far, blockchain analysis company financing totaled $107 million
  • Almost all compliance companies dealing with cryptocurrency are using blockchain to analyze business, and government agencies are using it.
  • To date, US government agencies have signed purchase orders and contracts worth nearly $10 million with blockchain analysis companies.
  • IRS, ICE, and FBI accounted for nearly 85% of the total blockchain analysis services.

To date, companies specializing in blockchain analysis services have received more than $100 million in investment. Although these companies provide analytical services to cryptocurrency companies, they still strictly abide by the obligations of anti-money laundering (AML) and understanding customers (KYC).

Blockchain analysis companies use data sharing models to collect transaction data for all of the customers they serve (mainly for legal currency versus cryptocurrency exchanges and government agencies). The more customers they serve, the better the product will be, or the more accurate the results will be. Blockchain analysis can score each blockchain transaction fairly accurately and evaluate the corresponding risk.

Chainalysis is a leader in the blockchain analysis industry, serving most of the industry's exchanges, stable currency issuers, and other companies dealing with cryptocurrency. The company received another $30 million in financing in February this year, with a total financing of $54 million and a post-financing valuation of $260 million. Its largest competitor, Elliptic, has entered the Japanese and Singapore markets and also received $23 million in financing this week, with a total financing of $34 million. CipherTrace, another company that provides blockchain analysis services, also received a total of $18 million in financing.

Also in February of this year, Coinbase acquired Neutrino for $13.5 million, and the acquisition was controversial because of Neutrino's association with the Hacking Team. Previously, Coinbase had business cooperation with Chainalysis and Elliptic, but the company said it would no longer increase the performance of third-party companies by sharing transaction data.

In addition to these companies, there are other companies that provide blockchain analysis services.

The total amount of financing for companies that specialize in blockchain analysis services is $107 million.

According to The Block research, public records indicate that so far, a number of US government agencies have signed purchase orders and contracts worth nearly $10 million with blockchain analysis service providers.

Source: The Block, Federal Government Procurement Data System (FPDS)

In 2018, the US government’s spending on blockchain analysis tripled—from $1.5 million to $4.4 million. Since 2019, US government agencies have spent $3.5 million on blockchain analysis, and full-year spending is expected to exceed last year, reaching $4.6 million.

Source: The Block, Federal Government Procurement Data System (FPDS)

From the data point of view, Chainalysis signed a service contract with government agencies worth 9 million US dollars (92.2% of the total order), which shows that Chainalysis is dominant in the public sector. Followed by Elliptic (6.1%), Neutrino (1.3%) and CipherTrace (0.5%).

Source: The Block, Federal Government Procurement Data System (FPDS)

The largest amount of the contract, worth $1.6 million, was signed with the IRS (US National Tax Administration) in April this year. The contract is mainly for "providing case support and training base for the cybercrime department." The largest contract with the FBI (FBI) is about "Chainalysis browser-based license", value 120 Ten thousand U.S. dollars. Signed with ICE (US Immigration Customs) is a contract related to the "software license" with a contract value of $1 million.

The total expenditures of government agencies in blockchain analysis services are broken down as follows. Among them, IRS, ICE, and FBI accounted for 85% of the total expenditure.

Source: The Block, Federal Government Procurement Data System (FPDS)

From the public record, we are unable to know the specific application areas of the blockchain analysis service. The issues that organizations are most likely to focus on are as follows.

Source: The Block

Author | LARRY CERMAK

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Editor's Note: This article does not change the original intention of the deletion.