Wyoming Bank Regulator Taps Chainalysis Training, Tools

Sep 17, 2020 at 12:57 UTCUpdated Sep 17, 2020 at 14:00 UTC.The Wyoming Division of Banking just granted its first crypto-friendly bank charter Wednesday.

Wyoming's chief banking regulator has turned to Chainalysis for "Beefing up" his division's monitoring capabilities of illicit cryptocurrency activities.

Under a one-year deal disclosed to CoinDesk Thursday, Chainalysis will train senior examiners on crypto tracing practices and grant two monitoring software licenses - plus investigatory support - to the Division of Banking as it eases into its new, crypto-facing compliance duties, according to Commissioner Albert Forkner.

Unveiled just one day after Wyoming awarded its first special purpose depository institution bank charter to Kraken, the novel partnership, among the earliest pair-ups featuring a U.S. banking regulator and a blockchain intelligence firm, illustrates how even America's fast-moving financial watchdogs are cautiously approaching oversight of an asset class that Forkner said still gives some folks the spooks.

Those rules are no different than the ones governing traditional American banks: Watch out for signs of money laundering, don't transact with sanctioned individuals, keep tabs on customer identities and uphold the minutiae of the Bank Secrecy Act.

Blockchains give Wyoming's banking regulators a powerful upside that cash cannot match: an immutable, public paper trail built into its code.

Chainalysis is among a handful of tracers supporting governments, companies and regulators with cryptocurrency monitoring software.

The New York-based firm has banked millions in contracts with the Federal Bureau of Investigation, Drug Enforcement Agency, Internal Revenue Service and other federal agencies in need of crypto support.

If, say, a bank allows its customers to send crypto to a blacklisted wallet address, then "We've got proof of those activities" that Forkner said has held up in court.

Once Kraken's banking business gets rolling in early 2021 and perhaps other SPDIs start dealing in crypto, too, he said the Division of Banking will start back-tracing transaction blocks to ensure the institutions are self-monitoring effectively.