Coinfirm, a technology company focused on AML regulations and compliance, has introduced a new regulatory tool, AMLT Oracle, which promises to ensure transparency within DeFi ecosystems.
Decentralized finance ecosystems (DeFi) are the frenzy of the moment. The ease with which anyone can access and interact with these financial platforms, without the need for third parties or intermediaries, is one of their greatest attractions. DeFi is the evolution of traditional finance, which eliminates the annoying regulatory controls, paperwork and bureaucracy of the conventional system and turns it into an environment of easy and quick access, as well as safe and reliable most of the time.
Thanks to its qualities and potential, DeFi is a sector that is growing overwhelmingly. In just 3 months, DeFi protocols have managed to triple the value they had in June. Currently, these protocols hold more than 11 billion dollars, the result of investments and deposited funds from users who increasingly trust this flourishing ecosystem. Due to its incredible growth, and also due to some problems related to several decentralized exchanges (DEX), regulators are beginning to turn their attention towards these spaces and observe, in their opinion, that it is worrying that the decentralized nature of DeFi is a viable way out that allows cybercriminals to successfully escape after committing some illegal activity.
For this reason, the regulatory and risk control services company for blockchain y cryptocurrencies, presented its new tool AMLT Oracle, aimed at ensuring AML compliance within the burgeoning decentralized finance ecosystems.
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What is AMLT Oracle?
AMLT Oracle is an anti-money laundering tool (Anti-Money Laundering – AML), designed by Coinfirm for the DeFi sector. It is the first smart solution based on Smart contract (smart contracts) that guarantee the legality and transparency of transactions carried out within decentralized platforms, eliminating the fear that a trader, investor or user may interact with nefarious actors in the crypto space.
The new tool is designed on the blockchain of Ethereum and the ERC-20 standard, making it a solution designed to interact with the interface of DeFi platforms and their smart contracts. Likewise, AMLT Oracle, as its name suggests, integrates “oracles” blockchains that have the ability to communicate with external data and the real world, allowing compliance with AML regulations to be verified.
A simple and effective tool
The operation of this tool is quite simple but effective, as explained Jakub Fijolek, Chief Technology Officer at Coinfirm.
“Usually the first tool we build is the oracle, we call it the reporting oracle because it allows for the generation of the same compliance report that centralized exchanges typically use… So if you send the query transaction to the oracle with the report you want information on, it can query the transaction status of that address and this gives it a C-score and the report ID.”
Thus, any DeFi platform or protocol can consult the AMLT Oracle and receive an AML risk score at the time of making a transaction or to query an address, avoiding doing business with nefarious actors in the ecosystem. If the risk score of a transaction, address or cryptocurrency wallet is too high, then the DeFi platform has the right to reject the transaction to protect its integrity. With this tool, DEXs have the ability to make decisions about their transactions with full awareness of the risks that accepting a transaction with a score that is too high would entail.
Furthermore, Fijolek points out that AMLT Oracle has the capacity to handle a large number of queries from different platforms in real time, so the tool guarantees an efficient service. Likewise, with AML Oracle, DEXs can report cryptocurrency addresses related to malicious actors or ransomware groups, hackers and other types of fraud and crimes. AMLT Oracle integrates a blacklist where all reported addresses are destined, to block funds and prevent transactions and movements from these addresses.
Importance for DeFi
As mentioned at the beginning of this article, decentralized finance platforms may become in the near future the ideal space for cybercriminals and suspicious actors to commit their crimes and illicit activities. As an example of a recent case we can mention KuCoin, who was the victim of a hack to their hot wallets (hot wallets) and suffered losses of over $280 million. Although the exchange and its partners acted effectively and have recovered much of these funds, it is estimated that around $19 million of the theft was actually stolen. they exchanged with success in Uniswap y chainlink, two decentralized exchanges that have no known AML or KYC requirements.
In light of this, AMLT Oracle represents a trusted solution that mitigates these risks, allowing decentralized platforms to continue their operations without committing offenses and crimes that violate the law. It should not be forgotten that even though these are decentralized platforms and cryptocurrency users appear to be exempt from complying with AML regulations, it does not mean that they really are, at least not in the eyes of authorities and regulators.
On the other hand, the integration of such a tool into DeFi means that regulations are coming to a sector that may end up not being as decentralized as expected.
About Coinfirm
Coinfirm is a leading global company in the design and development of AML compliance technology solutions for cryptocurrencies and blockchain. The company was founded in 2016, with its headquarters in London. Since its founding, Coinfirm has been committed to creating and developing the most powerful AML and analytics engine within the growing blockchain industry.
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