CipherTrace unveils software that lets DeFi protocols comply with OFAC sanctions

Blockchain forensics firm CipherTrace announced Friday that it has released a tool that can be integrated into decentralized exchanges (DEXs) and other decentralized finance (DeFi) applications to block addresses that have been sanctioned by the U.S. Treasury's Office of Foreign Assets Control (OFAC). 

Sanctioned blockchain addresses are typically associated with terrorist funding, funding weapons of mass destruction, or some other activity considered adversarial to U.S. national interest. That might include state-sponsored hackers like those from North Korea that have been linked with last year's $281 million KuCoin hack. Money stolen from KuCoin was laundered via DeFi platforms.

"The $40 billion locked in DeFi protocols puts an even bigger target on DeFi exchanges and protocols," said CipherTrace CEO Dave Jevans in the statement. "Ensuring that sanctioned addresses cannot use DeFi to fund weapons of mass destruction programs should be among DEXs' chief concerns right now."

CipherTrace’s tool relies on a node from Chainlink, a decentralized oracle network that provides data inputs for blockchain smart contracts. According to CipherTrace’s release, Chainlink’s node can send CipherTrace’s API data to any blockchain network and can cryptographically assure that the data is from CipherTrace.