Operation security at Paxful is set to increase after the Peer-to-Peer (P2P) exchange has closed a partnership with the blockchain analysis company Chainalysis.
What is going to happen is that Paxful will use certain Chainalysis technologies. Here’s what its co-founder and CEO Ray Youssef had to say about the new partnership:
“Paxful uses the Chainalysis Reactor to conduct deep investigations and the Chainalysis KYT to monitor transactions for any illicit behavior. Through working with Paxful, Chainalysis is evolving its policy and will evaluate P2P exchanges on a case-by-case basis before labeling them as risky, just as it does for other cryptocurrency exchanges.”
The First Time Chainalysis is Collaborating with a P2P Crypto Exchange
Collaborating with a P2P cryptocurrency exchange is a first for Chainalysis, with a spokesperson for the firm saying that:
“Paxful, which accounts for around 25% of all P2P cryptocurrency activity, is currently the only P2P exchange Chainalysis currently works with. We are open to talking to other P2P exchanges.”
Before, it had considered such exchanges to present risks because they’re mostly decentralized and don’t require their users to set up accounts.
People Prefer P2P Exchanges for Anonymity
When the first crypto asset in history, the Bitcoin (BTC), first appeared, it was completely anonymous. In the last 11 years while the crypto space has developed, data privacy has become more and more important. Hence, people trading cryptocurrencies focused on P2P solutions like LocalBitcoins in order to trade value anonymously.
The Paxful/Chainalysis partnerships comes in antithesis with the crypto industry’s principles regarding anonymity and privacy. Trying to give an answer to this puzzling matter, Youssef explained that:
“The Paxful marketplace is for the honest users. […] KYC and KYT keep the honest users in the platform, and give them more confidence to trade.”
Paxful Wants to Keep the Marketplace Clean
The debate on privacy and anonymity remains active, seeing authorities are saying they want the users to be protected from fraud, whereas honest traders are very determined to protect their data.
Paxful said it made big investments to comply with regulatory demands and in tools that monitor transactions, as it wants to keep the marketplace clean from scammer and fraudsters. Some other crypto exchanges using software from Chainalysis for monitoring any suspicious activity are Binance, Bitfinex and Bittrex, and the list doesn’t stop here.