In response to the economic sanctions leveraged against Russia, blockchain data analytics firm Chainalysis announced two new sanction screening tools. According to reports from Chainalysis, the screening tools include an on-chain oracle and an API. Furthermore, these tools will use tracking software to screen digital wallets and transactions to detect activities that are evading financial sanctions. As a result, using the Chainalysis tools, Web3 groups like DEXs, DeFi platforms, DAOs, and dapp developers can check for sanctions compliance.
The Chainalysis sanctions screening oracle is already available for use. As described by the firm, it is "a smart contract that can be called from other smart contracts to validate a wallet before allowing an interaction with the second contract". Chainalysis itself maintains the smart contract and will keep it updated regularly. On the other hand, the API is scheduled for release in April and will use the same data as the oracle for confirming if any sanctions list has the crypto address. However, unlike the oracle, the API is designed for centralized crypto exchanges and mobile user interfaces.
Both the tools have the same key purpose. The aim is to make it simple and quick to check whether crypto addresses are on the economic embargo list. Chainalysis co-founder and CEO Michael Gronager expressed, "Now is the time for the industry to demonstrate that blockchains' inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion." Gronager also added that these tools would be provided for free. Chainalysis has prioritized developing these tools to give the crypto industry what it needs, conducting screening without incurring any cost.
Chainalysis has partnered with the Commonwealth bank to implement these new tools amid the current world events. In addition, a large section of the international community continues to impose economic sanctions on Russia as a protest against the invasion of Ukraine. According to industry experts like Jake Chervinsky, while it is possible to evade sanctions using crypto, it can't be done at any significant scale. In fact, Chainalysis points out that the Russian government can not evade sanctions at scale without getting detected with blockchain's transparency.
However, US Senator Elizabeth Warren claims that some Russians are still using cryptocurrencies to evade sanctions. While Centralized exchanges already apply strict identity verification protocol, users can operate with more autonomy in DeFi. With Chainalysis' new screening tools, these problems can be avoided in DeFi as well.