Chainalysis, which provides blockchain analysis and data services, said it has secured US$170 million in funding from investors including Singapore sovereign wealth fund GIC, as wider cryptocurrency adoption fuels demand for forensic tools that enable market surveillance.
The New York-based company, which counts some of the world’s tax authorities including the US Internal Revenue Service as customers, is now valued at US$8.6 billion. Additional investors in this round, all of whom invested in earlier rounds, include Blackstone, Bank of New York Mellon, and Palo Alto, California-based venture capital firm Accel.
“Government bodies have long realised the importance of blockchain data and analysis,” Chainalysis said on Thursday. “In the past year the demand for risk management and business intelligence solutions from ... financial institutions entering the cryptocurrency space reached new highs.”
GIC’s investment comes amid a cryptocurrency sell-off that saw bitcoin fall below US$27,000 on Thursday, a level not seen since late December 2020. The second-largest token, ether, is trading 60 per cent below its peak last November.
The fall in cryptocurrency prices has come in tandem with dropping values for other risky assets, such as stocks and high-yield bonds, amid heightened fears of a global recession that could be exacerbated by more rate increases from the US Federal Reserve this year.
The cryptocurrency sell-off appears to crush hypotheses put forward by advocates, who argued that the US$1.25 trillion cryptocurrency market would not correlate with the performance of mainstream assets.
Cryptocurrencies increasingly play a role in money-laundering activities and illicit fund flows linked to sanctioned nations. Therefore more national agencies are relying on data from blockchain-analytics firms, such as Chainalysis and London-based rival Elliptic, to help bust criminal activities and prevent sanction evasions.
Elliptic, for example, has said that Iran is home to 4.5 per cent of all bitcoin mining globally as it looks for ways to circumvent trade embargoes and earn “hundreds of millions of dollars” in cryptocurrency assets, which can be used to pay for imports and bypass sanctions.
Last year, Chainalysis said it helped the US Treasury’s Office of Foreign Assets Control (OFAC) in an investigation of Russia cryptocurrency broker Suex, which was sanctioned by OFAC after it was implicated in laundering over US$160 million using cryptocurrencies.
GIC is the first sovereign wealth fund to invest in Chainalysis, according to data from venture-capital tracker Crunchbase.
In recent years, the sovereign wealth fund has made several investments in digital-asset firms, including New York-listed cryptocurrency exchange Coinbase and Hong Kong-listed BC Group, parent of licensed virtual asset trading platform OSL.
GIC has made the investment in Chainlysis due to “the increasing demand for trust and safety in the overall industry,” said Choo Yong Cheen, its chief investment officer for private equity.
Chainalysis, which employs more than 700 people globally after adding 450 employees last year, said it will use the new funds to invest in product innovation and expand global operations. It said it is looking to fill 370 job openings.