One of Wall Street’s largest banks and the first bank to publicly embrace the metaverse, JPMorgan Chase, announced it is investing in blockchain analysis firm TRM Labs.
The announcement comes as JPMorgan had earlier opened a lounge, Onyx lounge, in Decentraland’s metaverse, becoming the first bank to ever do so, indicating the banks intent to expand its portfolio in the cryptocurrency industry in 2022.
TRM is unique because the firm’s analytics software has become a go-to for regulators and law enforcement agencies looking to monitor the flow of illicit crypto transactions. Last week, banking giant BNY Mellon, announced it would begin integrating similar analytics tools from Chainalysis.
What you should know
- TRM was founded in 2017 by Esteban Castaño and Rahul Raina. The firm has created a niche in cryptocurrency transaction monitoring. Its transaction monitoring solution allows financial institutions and cryptocurrency businesses to meet Anti-Money Laundering (AML) regulatory requirements and manage reputational and operational risk.
- The platform is especially used by law enforcement agencies, as they use the firm’s forensics tool to investigate sophisticated crypto-related crimes. The firm touts to be the only platform that provides cross-chain analytics, which allows detection and investigation of high-risk activity across multiple blockchains, providing unique insight into money laundering techniques increasingly used by sophisticated threat actors.
- TRM Labs solutions have helped highlight the transparency of blockchain-powered financial transactions, putting to bed the myth about cryptocurrency transactions being untraceable. This is evident as the Department of Justice was recently able to track and retrieve $3.6 billion in Bitcoin stolen from the crypto exchange Bitfinex in 2016 using analytic tools like the kind TRM Labs uses.
- Although TRM does not disclose the entirety of its cliental list, the Drugs and Crime Office of the United Nations (UNDOC) as well as the Internal Revenue Service, major British fintech, Revolut, and the online trading brokerage, Robinhood, all use blockchain analysis to monitor crypto transactions.
- TRM Labs was recently able to raise $60 million in a Series B funding, led by Tiger Global and other prominent industry players such as venture arm of American Express, Visa, and crypto venture capital firm, Castle Island Ventures.
- The firm has carved out a niche by tracing crypto flows across different blockchains, especially on the venture-backed Solana blockchain. Its client roster includes crypto custody bank Anchorage Digital, Circle, FTX.US, Moonpay and Binance, among others.
What they are saying
Esteban Castano, TRM’s co-founder and CEO, said in a statement that JPMorgan investment, “clearly highlights the significance of the growing crypto economy and the importance of building trust and safety in this ecosystem to sustain its growth.”
Umar Farooq, CEO, Onyx by J.P. Morgan stated, “TRM’s vision to drive security and integrity in crypto ecosystems through sophisticated analytics solutions aligns with our ambitions for building blockchain products at J.P. Morgan that are compliant and secure. We’ve spent the last six years exploring the possibilities and applicability of blockchain technology – leading infrastructure companies like TRM will help usher in the future of secure blockchain and crypto use cases.”
What this means
With the likes of traditional companies like JPMorgan making investments in the cryptocurrency industry, it is becoming evident that many legacy companies are exploring the need to offer or have a form of cryptocurrency investment on their balance sheet.
Also, we are seeing increased investments by large traditional U.S. banks in blockchain regulatory technology for digital currencies, which will aid compliance and sanctions screening for these banks as they are several reports that they are looking to offer cryptocurrency-related services.
For example, last year, JPMorgan became the first major bank to provide all wealth-management clients with access to bitcoin and other cryptocurrency funds as its wealth management division can now accept orders to buy and sell five crypto products including Grayscale’s Bitcoin Trust, Bitcoin Cash Trust, Ethereum Trust, Ethereum Classic products, and Osprey Funds’ Bitcoin Trust.
This indicates that digital currency investments are becoming more mainstream and there is a need for banks to make strategic investments like JPMorgan to ensure they understand and fully offer these services to their clients and customers alike.
