Experts from all sectors agree we need more effective, efficient tools to counter the criminal use of blockchain technologies such as crypto-assets. Can better standards for blockchain intelligence provide an answer?

This will be a major focus of the inaugural Blockchain Intelligence Forum to be held in Bucharest on 10 April 2025, as part of the Digital Innovation Summit Bucharest 2025, of which the Basel Institute is a supporting organisation.

This in-depth Q&A looks at the concept of blockchain intelligence and practical use cases, the quality of current blockchain intelligence and the need for recognised standards and professional training to build capabilities in the public and private sectors. 

Thanks to Bogdan Vacusta (National Bank of Romania), Nico Di Gabriele (European Central Bank) and Victor Vevera (ICI Bucharest) for the insights. The views expressed are personal and may not be necessarily aligned with those of the institution of affiliation.

What is blockchain intelligence?

Blockchain intelligence is the discipline of gathering, processing and analysing blockchain transaction data and combining it with off-chain information.

The aim is to provide a holistic package of intelligence for use by regulators, policymakers, financial institutions, law enforcement agencies and compliance professionals.

How is it different from blockchain analysis or crypto-asset tracing?

Blockchain analysis and crypto-asset tracing are narrowly focused on a single source of crypto-asset flows. This is often misleading as it does not provide insights into the broader network of relationships.

In contrast, blockchain intelligence enables analysis of the duration, size, frequency and quality of transaction flows. It integrates that data with off-chain intelligence to provide a holistic overview of the operating environment.

This macro-level analysis of blockchain transaction behaviour empowers professionals to make better-informed decisions, while also facilitating granular insight into specific counterparties.

Another plus point is that blockchain intelligence uses empirically tested methods founded on objectively and independently verifiable data, such as supervisory reporting and public disclosures made by crypto-asset service providers and issuers.

How can blockchain intelligence aid the fight against financial crime?

Existing blockchain tracing methods are useful for initial investigations. But their focus is too narrow to address systemic risks or combat sophisticated criminal organisations employing a variety of methods to circumvent financial controls.

Blockchain intelligence allows analysis at both macro and micro levels. This helps to reveal the key nodes and weak points of illicit networks that facilitate financial crime – essential for law enforcement to dismantle them.

What are some use cases?

Blockchain intelligence capabilities are particularly valuable for:

Regulators and policymakers, to formulate and implement effective regulations and policies that enable actionable supervision and oversight of crypto assets, crypto-asset service providers and financial institutions.

For example, blockchain intelligence would have enabled the Monetary Authority of Singapore (MAS) to uncover that crypto-asset lender Hodlnaut was secretly sending customer funds to the ultimately doomed Anchor Protocol. At the time, the MAS had awarded Hodlnaut an in-principle digital payment token license, making investments with the company appear safe and luring in even more retail investors.

Blockchain intelligence could have enabled the monitoring of crucial Hodlnaut wallets, provided regulators insight into where the bulk of crypto-asset flows ended up and potentially prevented over USD 190 million worth of retail losses.

Financial institutions, to:

• establish the source of wealth for clients dealing in crypto assets;
• open new customer segments which, using current analytical methods, would be considered too risky;
• establish effective AML/CFT frameworks for crypto assets; and
• provide banking services to both crypto-asset service providers and individuals safely.

Blockchain intelligence also enables active monitoring and management of tokenised assets.

For example, Paxos Trust LLC, holder of a BitLicense granted by the New York State Department of Financial Services, was an issuer of the dollar-backed stablecoin Binance USD (BUSD) on the Ethereum blockchain network.

The cryptocurrency exchange Binance, however, also issued a “wrapped” and unregulated version of the BUSD stablecoin on its own blockchain, the BNB Smart Chain. It was unbacked by as much as USD 1.4 billion.

The matter was ultimately brought to light by a blockchain intelligence firm. Had Paxos had direct access to blockchain intelligence, they could have noticed that Binance was creating hypothecated versions of BUSD that were not adequately backed.

Potentially billions of dollars’ worth of market manipulation and the reputational hit to the licensing regime could have been avoided.

Law enforcement, to enhance existing investigations and to uncover and establish relationships where none would otherwise have been noticed. Blockchain intelligence provides the capability to link off-chain investigations to blockchain transactions, providing a more comprehensive overview of the threat environment.

For example, a two-month-long Forbes investigation using blockchain intelligence revealed how regulated venture capital firm Digital Currency Group benefited from a North Korean crypto money laundering scheme. A North Korean hacker outfit purportedly used crypto-asset mixing protocols including Railgun to launder stolen crypto, in violation of international sanctions. Through their investment in Railgun, Digital Currency Group and other investment firms received fees that were generated by the laundering.

Blockchain intelligence could have detected these flows in real time and the money laundering activity could have been stopped in its tracks.

Compliance professionals, to better understand the compliance risks posed by crypto assets in the context of overall customer due diligence and compliance verifications.

For example, a large Asian bank considered onboarding a client who had derived their funds from bitcoin mining. The bank used blockchain intelligence to establish that client’s source of funds, allaying suspicions and enabling it to onboard the client safely.

Should we be worried about the quality of blockchain intelligence currently?

Yes. Since there are currently no established or empirically tested standards, there is a real risk that inaccurate blockchain “intelligence” is presented as fact.

To prevent errors and misattribution, we need rigorous standards to test the integrity of blockchain intelligence. Users must also understand its limits and its role in the overall analysis process.

How do investigators and analysts currently do blockchain analysis?

Many practitioners in the public and private sectors rely on commercial tools to trace transactions on the blockchain, but may lack understanding of how these operate or their limitations.

They may also simply rely on information that private blockchain tracing companies provide, with no means to independently verify the results and understand methodologies employed.

The information may be correct. But it’s a bit of a “black box” and the resulting blockchain intelligence may be of dubious quality – something that would never be accepted in traditional financial investigations.

Are you calling into question the quality of blockchain evidence used in court?

Yes. There are cases in the United States especially where the quality of the blockchain tracing methodologies has been questioned.

For example, in the case United States v. Sterlingov in 2024, the defendant was charged with operating the crypto mixer the Bitcoin Fog to launder illicit crypto assets and evidence in the form of blockchain analysis was provided by Chainalysis. The defence argued that “the [g]overnment's ‘blockchain analysis’ is junk science.” “The problem is we have no data set, no scientific data set with which we can measure the reliability and the accuracy of this software”, they said. This has triggered significant debate.

Where the quality of evidence from the blockchain is questionable, it may be dismissed – or even worse, result in unjust outcomes and potentially the conviction of innocent defendants.

Fortunately, in most cases so far, other evidence existed that enabled the prosecution to secure a conviction beyond a reasonable doubt. 

The quality of blockchain intelligence needs to be subjected to rigorous statistical evaluation and analysis. Where there is ambiguity, the burden to prove that adequate standards have been met should be on the party seeking to rely on the evidence.

How can law enforcement agencies build capabilities in blockchain intelligence?

It’s difficult!

• First, there are currently few options outside of commercial solutions. Training tends to focus on the specific solutions developed by the training provider.
• Second, when new staff are hired, especially in law enforcement and the public sector, these tend to be blockchain tracing experts who have gained their expertise using commercial tools. Again, this may lead to methodology bias.
• Third, the quality of available training varies significantly. Blockchain intelligence requires expertise in law, computer science and finance. Training courses rarely acknowledge the need to have at least a basic understanding of each of these fields.

Last, currently expertise is tied to certifications issued by providers of commercial tools, with no independent means to test the knowledge and skills of existing or new staff.

What can be done to improve blockchain intelligence tools, training and quality?

For tools, there is a pressing need for public-private partnerships to develop independently verifiable blockchain intelligence solutions. This would give all users more options. Working with universities, research organisations and other academic institutions is a good starting point to determine the reliability of blockchain intelligence and further research new applications.

For training, we need non-commercial blockchain intelligence training programmes adhering to the highest standards, with inputs and best practices from both public and private sector stakeholders.

For qualifications and hiring, we recommend that the role of a blockchain analyst is professionalised and officially recognised in frameworks such as the European Skills, Competences, Qualifications and Occupations (ESCO) classification. For that, an independent accreditation process for recognised professionals needs to be established, involving stakeholders from different sectors including independent accreditation bodies.

Underlying all this is the need to develop global standards based on a deep body of research that acknowledges both the capabilities and the limitations of blockchain intelligence.

A practical first step towards all of these goals is the creation of working groups of experts, academics and relevant organisations focused on the exchange and interoperability of blockchain intelligence, as well as on sharing technology and best practices.

Do initiatives to this end already exist?

Examples of such initiatives in which we are personally involved include:

• The Blockchain Intelligence Academy (BIA), whose mission is to develop “actionable, independent blockchain intelligence capability, in service of the truth by, placing “the integrity of blockchain intelligence above all else”. It evolved from a public-private partnership between ICI Bucharest and the Singapore-based blockchain intelligence firm ChainArgos. BIA is committed to developing training standards and is openly inviting all blockchain analytics providers to this initiative, as a key objective is to facilitate the use of various tools in training programs conducted by BIA.
• The Blockchain Intelligence Professionals Association (BIPA), which brings together practitioners in the field of blockchain technology. Its objective is to “establish a platform for dialogue, to facilitate training, sharing of expertise, good practice and to encourage new partnerships”. Bogdan Vacusta, the chairman of BIPA, is actively involved in facilitating interactions between blockchain analytics providers, with a key objective to facilitate public-private partnerships focused on standards and interoperability.

Both organisations are closely involved in the first ever Blockchain Intelligence Forum in Bucharest. Here, a special working group will be launched aimed at introducing a new occupation – Blockchain Analyst – into the Romanian and European classifications of occupations and qualifications.

The two initiatives are also exploring ways to provide blockchain intelligence accreditation that stakeholders globally respect and rely on.

Remind us: what is the dream? Our end goal?

The dream is to develop global standards of excellence for blockchain intelligence capabilities. Training is a top priority, to both strengthen the blockchain intelligence discipline and develop expertise that is less reliant on commercial blockchain tracing tools.

Our end goal is to establish a globally recognised standard for blockchain intelligence skills and develop the capabilities of professionals accordingly to combat the rise in illicit finance and preserve market integrity. A clean market is a precondition for its stability and thus capacity to fulfil people’s needs.

The rapid growth of crypto-assets and the development of blockchain technology has seen an increase in their use to facilitate financial crime. This is why it’s more important than ever to provide a structured, robust and resilient framework to continually improve and train blockchain intelligence professionals. 

Learn more

• Learn more about the Blockchain Intelligence Forum in Bucharest on 10 April 2025.