ETH Hype and Ethereum Bull Run: How to mitigate ML/TF risks?

Key takeaways

  • Lately, ETH price rocketed and reached its all-time high on Feb 10, 2021
  • The bull run is due to several reasons such as an increased interest in the cryptocurrency
  • This price increase also attracts scammers and hackers

Ether (ETH), Ethereum’s cryptocurrency has been one of the main focuses in crypto markets recently. Indeed, the 2nd largest cryptocurrency reached its all-time high value on Feb 10, 2021, at $1,826.701. Experts are convinced that it will continue to increase.

Ether’s price increases along with the ETH network’s transaction fees that even went beyond $202. This surge also reveals the growing demand for ERC-20 tokens and stablecoins that derive from the growing usage of decentralized finance (DeFi) platforms.

Why this increase in ETH prices?

Lately, there has been a surge of interest in cryptos at large. Indeed, the recent Bitcoin bull run draws a lot of attention to crypto markets. Since Ethereum is the 2nd largest cryptocurrency after Bitcoin, it also benefits from a surge of interest from investors. Besides, more and more institutional players are interested in cryptos. According to Grayscale3 and Coinbase4 findings, institutions are starting to invest in cryptocurrencies, and amongst them ETH. This surge of interest from different players in crypto markets also sustains the growing price of ETH.

Besides the interest for ETH can also be explained by the recent launch of Ethereum 2.0 which will upgrade the current version of Ethereum by reducing transaction fees or by switching to a proof-of-stake validation for instance. This long-awaited update will make the Ethereum network faster and more secure and draws a lot of attention from the community as well as from new investors.

In the second half of 2020, there has been a boom in the usage of decentralized finance (DeFi) protocols that rely on the Ethereum blockchain. Indeed, there was around $1.8 billion locked in different DeFi protocols in July 2020 and $275 billion locked in early February 2021 – which represents a 1400% increase in just a few months. The DeFi boom is another component that results in the recent ETH price increase.

However, the increase in ETH prices also attracts some malevolent players such as hackers and scammers. Indeed many scams and hacks take place on the Ethereum blockchain and involve ETH, ERC-20 tokens, or stablecoins. For instance, Kucoin exchange was hacked in Sept 2020 and more recently the Harvest Finance protocol also suffered from an attack in Oct 2020. Both platforms lost ETH and ERC-20 tokens in the incidents. Besides, at the end of last Dec, around $4 billion in cryptos has been seized from the PlusToken scam, a part of the seized funds being ETH and stablecoin USDT. 

Undoubtedly, ETH, ERC-20 tokens, and stablecoins could be attractive to criminals and terrorists and represent an increased risk of money laundering, even more with the price increase they are currently benefiting from. Therefore, it is important to properly manage risks that derive from this trend.

How to improve risk management with Scorechain solution?

As Ether and ERC20 tokens become more and more popular, the need to mitigate ML/TF risk for crypto companies equally becomes more urgent.

Scorechain Ethereum Analytics Platform can identify the origin and destination of Ether, ERC20 and stablecoins, helping compliance teams to identify suspicious transactions or addresses and file reports accordingly.

For each Ether, ERC20 token and stablecoin, Scorechain Ethereum Analytics Platform provides:

  • Risk scoring at the level of transaction and address with the possibility of customizing score to implement the user’s internal control policies;
  • Risk indicators to help users redflag suspicious activities with more than 350 risk scenarios, covering entities types, transaction behaviors and jurisdictions;
  • Real-time alert system to keep monitoring suspicious activity and take prompt actions if needed;
  • Last but not least, KYA (know-your-address) report and KYT (know-your-transaction) report for the compliance team to file Suspicious Activity Reports (SARs) to the authorities.

Want to know more about Scorechain crypto risk-AML solution? Contact us for a free demo: contact@scorechain.com  

About Scorechain

Scorechain is a Risk-AML software provider for cryptocurrencies and digital assets. As a European leader in crypto compliance since 2015, the Luxembourgish company serves worldwide customers in 33 different countries with more than 150 licenses established, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets customers onboarding, audit and law firms and some LEAs.

Scorechain solution supports Bitcoin analytics with Lightning Network, Ethereum analytics with all ERC20 tokens and stablecoins, Litecoin, Bitcoin Cash, Dash, XRP Ledger and Tezos. The software is able to de-anonymize the Blockchain data and connect with sanction lists in order to provide a risk scoring on digital assets transactions, addresses and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to its customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.


References:

  1. https://coinmarketcap.com/currencies/ethereum/
  2. https://blockchair.com/ethereum/charts/average-transaction-fee-usd?interval=full
  3. https://grayscale.co/insights/grayscale-q1-2020-digital-asset-investment-report/
  4. https://primebroker.coinbase.com/2020-in-review
  5. https://defipulse.com