Elliptic, a blockchain forensics firm based in the UK recently received a $5 million investment from Wells Fargo. The company intends to use the funds to expand its operations to assist financial firms to detect illegal crypto transactions. Why might Wells Fargo be so interested in Elliptic? 

Wells Fargo & Elliptic 

Wells Fargo, a bank based in the US invested in the crypto analytics firm, bringing its total investments to over $28 million thus far. The firm was founded in 2013 and they have been working with AI Lab, a research team based at MIT and funded by IBM. In 2019, AI Lab produced the biggest data set of Bitcoin transactions ever. Its research has also enabled it to uncover terror financing using Bitcoin.

With the funds it received in its latest funding round, Elliptic will expand its operation into Asia. Additionally, it will use the funds to develop Discover, a tool that will be used by banks to help them uncover and mitigate risks that are experienced in the crypto sector.

During a recent interview on CNBC, the company’s CEO, James Smith, said that by understanding how their customers were trading in crypto, banks can use that knowledge to decide if they should be concerned.

The CEO went into detail about Discover. He said that the tool aims to offer banks a detailed profile of all transactions across more than 200 crypto exchanges globally. As a result, they can make better decisions while ensuring that they comply with strict regulatory measures imposed by the authorities. He added that more financial institutions were coming alive to the fact that even if they do not deal with crypto directly, they were working close to it. As a result, they were indirectly exposed to the risks that come with crypto and they had to understand how to manage this risk.

Wells Fargo Made the Right Move

The CEO added that the decision by Wells Fargo to take part in the Elliptic funding round was a sign they were interested in learning how they can manage crypto risk. Globally, regulators have been rolling out stringent measures to deal with criminal activity involving crypto.

A good example is the EU’s AMLD5 riles, which came into effect on January 17. Various nations, such as Germany have already begun to enforce these rules. These rules are likely to have far-reaching implications for the crypto industry globally. This is because the EU is one of the biggest economic zones in the world and any crypto business that wants to expand there will have to adhere to these rules. Some companies have already announced plans to move out of the EU due to these rules.

Wells Fargo Cryptocurrency Policy – Why Interest in Elliptic?

If we go back to 2019, reports surfaced on Wells Fargo testing their own cryptocurrency for “internal transactions.” This would ultimately help the entity move money more efficiently across borders and branches. With the growing interest in Elliptic, it raises questions about their private digital currency plans. If their pilot / tests aren’t going well with their digital currency, they could very well be looking into other ways to move money across borders with digital assets.

On the flip side, Wells Fargo could also be interested in Elliptic to better assess their client base. Last year, Wells Fargo was one of the financial giants that banned crypto purchases with credit cards. Aside from credit cards, their clients have various ways of purchasing digital assets. Another possibility is that the firm is taking a deeper dive into the markets for bigger reasons. On the retail side, maybe the firm has entertained the idea of allowing its client base to purchase digital assets.

Crypto Regulation 

However, it is unlikely that the unregulated nature of the crypto industry will last for long. No matter where crypto businesses operate, they will soon have to adhere to strict rules that will govern the sector. It is thus important for them to embrace and understand tools such as the one being developed by Elliptic. This way, it will be easier to comply with regulatory requirements.

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