LocalBitcoins further tightens compliance via Elliptic's blockchain monitoring tools

Peer-to-peer (P2P) crypto exchange LocalBitcoins has further tightened its compliance by adopting Elliptic's blockchain monitoring solutions.

The Finland-based exchange now uses Elliptic's software to prevent the illicit use of its platform and comply with the EU's fifth anti-money laundering directive (AMLD5). LocalBitcoins is the "go-to" platform for receiving criminal funds, according to a recent analysis from CipherTrace.

LocalBitcoins has now essentially automated its compliance process with Elliptic tools as it doesn't have to manually perform customer due diligence and report suspicious transactions. The automation helps save time and money, Elliptic's co-founder and chief scientist Tom Robinson told The Block. LocalBitcoins did not respond to The Block's request for comment. 

LocalBitcoins' move comes in addition to its know-your-customer (KYC) measures implemented in October, which seems to have affected its market share. Last month, LocalBitcoins rival Paxful overtook it in weekly global trading volume for the first time. LocalBitcoins saw trading volumes of over $39.5 million for the week that ended June 6, while Paxful did volumes of nearly $39.8 million.

LocalBitcoins recently told The Block that the KYC measures helped it reduce transactions from darknet markets by around 70% between September 2019 and May 2020. 

Notably, Paxful also uses blockchain monitoring tools from Chainalysis, since March of this year, to identify and investigate high-risk crypto transactions.

Elliptic's Robinson said the firm works with "a number of P2P crypto exchanges" and is in "active discussions" with several others. Robinson declined to share names of those exchanges.