Fidelity Investments and Morgan Creek back $3.5 Million Funding Round for Elementus
Blockchain analytics firm Elementus has raised funding from several funds, including one linked to Fidelity Investments and Morgan Creek Digital. The firm aims to broaden analytics in the space by monitoring the use of cryptocurrency for illicit activities, similar to what Chainalysis does, as reported by Fortune, September 23, 2019.
Tracking Blockchain Activity
Bitcoin and other public ledger-based cryptocurrencies are widely misunderstood by the public. Many believe that transactions are hidden, but this is far from reality.
While identity is pseudonymous over a public ledger, all transactions are openly available to anyone with a basic internet connection.
Cryptoassets as a whole are a nascent asset class searching for legitimacy, and Elementus wants to help bring more institutional bandwidth to the entire space.
A recent example that highlights the need for such services is the QuadrigaCX scandal. By using blockchain analytics and tracing funds around, firms were able to figure out that Gerald Cotton, the deceased founder of Quadriga, routed customer funds to personal funds to store and trade on margin.
The target market for Elementus would primarily be exchanges and banks who aim to secure themselves from the risk of laundering funds. Cryptocurrency flagged by Elementus as potentially criminal will be blocked from being deposited on exchanges using their service.
With law enforcement agencies cracking down on crypto companies, the need for such services has been direr.
Moral Controversy of Blockchain Analytics
The entire concept of decentralization is to stop giving corporations and governments the ability to censor individual activity.
Many prominent Bitcoiners have spoken out against these practices as they suppress individual liberties and the entire libertarian agenda behind Bitcoin. It goes without saying that criminal activity must be weeded out, but the definition of ‘criminal’ is subject to intense debate.
Hypothetically, governments would consider someone violating American sanctions as a criminal, and flag funds indulging in such activity. In reality, these monitoring services should actually be emphasizing on terrorists, money launderers, murders, etc.
Banks have used blockchain analytics to track the activity of their customers, and this has also been at the heart of anti-monitoring debates. Unfortunately, this isn’t something that can or will be stopped if the space as a whole wants to emit an air of legitimacy and gain mainstream adoption.