Andy Samu of Digital Startup sat down with Pawel Kuskowski, CEO of Coinfirm, to answer some of the questions surrounding Coinfirm’s platform and the future of cryptocurrency compliance.
What are the goals of Coinfirm and the services you provide?
We started Coinfirm to solve major problems that existed and we saw on the horizon. First off, hundreds of cryptocurrency related companies were having a very hard time receiving basic financial services such as a bank account from the traditional industry. Literally multi million dollar companies were in a precarious situation and everyone was losing in this situation including the financial institution. Why was this happening, well financial institutions had no standard and way of determining the potential risk and risk profile of cryptocurrency entities. This situation was really hurting the commercial growth in the industry. Another one was that compliance for companies touching cryptocurrencies or blockchain transactions were dedicating large amounts of time and resources towards compliance and that’s because compliance to this day is still usually a very expensive and manual process. At best a service provider will throw huge sets of data at a client and maybe provide a tool to help analyse and pull out the needed actionable conclusions. Some of our clients spend 50% of their time and labor on it. This also is choking the ecosystem’s growth. Countless polls and quotes have shown that commercial entities wont adopt cryptocurrencies and blockchain transaction systems mostly due to regulatory compliance concerns. Our platform was created to not only solve these issues and take compliance from a double-digit percentage of time and labor burden and turn it into a utility and help push cryptocurrencies and blockchain into mass commercial and therefore individual adoption as our big goal.
Some view your service as controversial, could could you explain more why you view yourselves as a positive direction especially compared to competitors?
Similarly to many others, we see that cryptocurrencies will remain a niche market without a proper compliance solution to help bring it to the commercial and therefore mass market. We offer services that we believe will help allow cryptocurrencies and this great technology to be adopted by a much wider market. This will not only help with implementation and adoption but also increase the price and value of these currencies. One should not lie to himself that he or she can remain totally anonymous especially with bitcoin since there are companies and government bodies that try to do some similar analyses – they just do not show it to the market. We do, transparency has been important to us from day one so we show how you are ‘presented’ in the digital currency sphere for everyone’s benefit.
How does this affect individual users that want to remain anonymous or operate in the crypto and not commercial or regulated system?
We do not remove privacy, we cannot and we do not want to remove privacy. The total anonymity aspect was never there in Bitcoin by design. Users should be completely aware of that and that it is done in this way, if not us, a company who cares about the ecosystem it will be done and is being done by people who don’t. It’s a matter of who wins out and becomes the main standard and player, which we see ourselves as the obvious choice of course.
Once the Bitcoins leave the address is the next holder and the Bitcoin deemed tainted as well?
No, it doesn’t work that way and this can’t be looked at in such an elementary way. It’s much more complex than that. We’ve invested a lot of our time and work to build processes that don’t taint the bitcoins themselves but focuses on the entities that actually participated directly in nefarious actions.
Some people have questioned whether this has a negative effect on the fungability of Bitcoin and crypto, how do you approach or answer to that?
Well that’s not the case, as we’re not flagging the coins themselves. In a lot of ways this doesn’t differ much from the traditional market. But for any cases where innocent users or the bitcoins themselves are affected we believe that there will be services, like exchanges or payment processors that will be able to “clean the funds” and we ourselves are working directly with users, companies and partners to figure out standards and methods to ensure that. But either way we do not mark bitcoins themselves in the system, we just provide relevant entity information relating to the risk exposure. This is necessary in P2P transactions.
How do you determine or reach your AML rating?
We apply the highest banking standards for traditional currencies, so there are certain standard patterns and risk indicators plus we add a number of new ones that are specially designed for the unique world of cryptocurrencies. We currently have almost 120 different proprietary algorithms and scenarios and are currently building new ones.
A good amount of btc themselves hit darkmarkets or mixers at some point, how do you guys treat the coins themselves and guarantee that good actors who had nothing to do with those transactions aren’t affected?
I of course can’t get into any proprietary details, but we have a number of different scenarios and methodologies for such as clustering and differentiating between inflows and outflows in our analysis. We also listen closely to our clients and users when they speak about fungibility, privacy, anonymity, regulations, problems with banks and we adjust our platform and approach accordingly.
Your free online service isn’t your actual core service? Can you comment on that more?
First off we wanted to give something to the ecosystem free to use, play around with, and benefit from. Secondly, Coinfirm set out from day 1 to be as transparent as possible about what we were doing and in which direction we were heading. This is one reason I think we’ve been a bit more controversial than our competition, they don’t show what they’re doing. Last but not least we created it to get feedback from users. We want to build something that is needed for all key players on the market such as exchanges, e-commerce companies and individual users. The best way is to show how we do it. We would provide more in the free service but unfortunately some of our competition is literally copying our solutions so we prefer to save the best parts for the enterprise clients or private individuals who are willing to purchase our data on particular addresses or transactions. Also, quick announcement, very soon we’re coming out with a new and improved site and platform, so look out for that.