From rising costs to attribution trust concerns, blockchain analytics will face many challenges in the coming year. As the year draws to a close, it's time again - time for predictions. We've heard a lot about the bright future of blockchain technology, starting with the promise of cross-border seamlessness Payments to It rises of real world token assets (about $117.74 billion He deserves Of distinct assets to date) and decentralized identity solutions (this market Expected To reach $2 trillion by 2030).

DeFi Compliance Year

DeFi is already on the radar of regulators. To name a few, Uniswap Labs received a He notices From the Securities and Exchange Commission and $175,000 penalty From the Commodity Futures Trading Commission; The court specific Lido DAO as a general partnership. Furthermore, the court held that identifiable participants who effectively manage a DAO's operations cannot avoid liability simply because it is decentralized.

No matter how decentralized DeFi projects are, be prepared – 2025 will be the year of DeFi compliance. And it must be done. Total number of DeFi users it has Transgression 131 million. Criminals use DeFi services to transfer and launder illegal funds, to exploit Weaknesses in the technology behind DeFi platforms, enforcement, and AML/CFT regulations.

The application of FATF standards to DeFi is Difficultespecially when it comes to locating, operating or recording platforms. With the lack of KYC transactions, P2P transactions, cross-chain protocols, and privacy tools, decentralized finance challenges regulators and analytics as well.

Increased compliance costs

With more regulations, compliance becomes more expensive. alternative? Risking hefty fines, reputational damage, and business interruption. This is another big problem that we need to address, and we are already looking at ways to manage this by increasing the speed of operations.

There are two main reasons for cost growth:

• More challenges, which include: 1) Increasing cybercrime. For example, crypto investment fraud losses have been reported to IC3 jump 53% in 2023. 2) Evasion of sanctions. In 2023, a 114% increase in sanctions evasion incidents was recorded compared to 2022. This came after a 71.5% increase in 2022 compared to the previous year. 3) Scammers learn quickly and become difficult to catch, for example: Use Amnesty International. Regulators, such as the Commodity Futures Trading Commission (CFTC), are warning that criminals are leveraging artificial intelligence to carry out more sophisticated cryptocurrency fraud. 4) Increased political instability is causing shifts in the adoption and value of cryptocurrencies. In areas experiencing political unrest, Bitcoin (Bitcoin) Adoption He increases Where individuals seek to protect their wealth from government interference and economic instability.
• Increased workload on compliance officers.

As regulatory clarity increases, there are more regulations to follow, resulting in an increased workload for compliance officers who must ensure compliance with these new requirements. To sort through just 1,000 alerts a month, for example, you need about 20 compliance officers, not to mention the money spent on KYC checks. So, if a business gets a customer who deposits $100, or even $1,000, the payment will not go through if the officer has to check at least one alert about that customer.

The compliance department is not the one that makes the profit, it spends the money, and its costs are distributed to clients. Additionally, there is a risk of fines and imprisonment for non-compliance (remember Binance to push More than $4 billion to combat money laundering and sanctions violations Czechoslovakia gets four months in prison).

This increased workload not only strains resources, but also increases the risk of oversight errors. The pressure to process thousands of transactions daily, each requiring detailed analysis and documentation, can quickly lead to missed red flags, incomplete investigations, or incorrect risk assessments.

Introduction to Amnesty International

One potential way to reduce costs is to introduce artificial intelligence to automate simple tasks that do not require decision-making by a compliance officer. For example, it can handle sending notifications to specific compliance officers or distributing alerts among team members with a lower workload, answering frequently asked questions, etc.

However, as of now, AI is not ready to handle tasks that require human judgment, such as risk scoring. So, the best approach for now is to carefully integrate it into routine tasks, and everyone can sign up to test AI in analytics with us.

Attribution confidence

One of the reasons why AI cannot yet be used for serious matters is the lack of confidence in attribution. It exists because two types of data may be confused:

• Cases where the data is 100% verified and can be relied upon for use in court.
• Cases where the information comes from less trustworthy sources, for example, someone on X claims that a project is a scam. This type of data is not enough to seize money or accuse the customer. However, this could bring the matter to compliance officers for further investigation.

For attribution, only data with 100% evidence, which is specific enough to be used as evidence in court, can be relied upon. Without solid evidence, attribution may be rejected or challenged in court. This weakens enforcement efforts and damages the reputation of the entire cryptocurrency industry. If attribution is inaccurate or unverified, people lose trust in blockchain analytics providers. As this trust fades, regulators and legitimate companies may be reluctant to engage with cryptocurrencies.

Privacy of operations

When we talk about trust, privacy is also important. It is essential to keep all compliance activities private so that no one knows which transactions are being reviewed until the process is complete.

This level of confidentiality is essential not only for businesses but also for regulatory agencies and law enforcement. For regulators and law enforcement, confidentiality allows investigations to be conducted without interference so that bad actors do not receive advance warning. If it becomes public knowledge that transactions are under review, fraudsters and money launderers can exploit the information to cover their tracks, delete evidence, or move illicit funds elsewhere.

Using private servers like we do is a good solution to prevent this. It ensures that the company/law enforcement/regulators are able to handle compliance activities without worrying about leaks or unauthorized access. With such servers, sensitive data remains under strict control, so bad actors will not be informed about ongoing investigations.