You can think of Chainalysis as a blockchain detective. The New York-based firm is best known for its forensic tools that help law enforcement agencies track the movement of bitcoin, but it also helps financial financial firms keep tabs on who is using digital currencies.
On Thursday, Chainalysis said it had raised $16 million from Benchmark in a move the firm says will help it ramp up its sales efforts and expand the number of cryptocurrencies it tracks. The Series A funding round will also see Benchmark’s Sarah Tavel, a Pinterest veteran and longtime crypto authority, join the Chainalysis board.
The company also used the occasion to unveil a new product called Know Your Transaction, which will make it easier for banks and exchanges to track suspicious activity and comply with anti-money laundering laws.
Blockchains, which create permanent transaction records across multiple computers, by their nature do not reveal detailed personal information about who is sending digital money to whom—only aliases. Nonetheless, Chainalysis is able to use statistical techniques to infer whether given transactions are likely to be tied to criminal activity.
While the company initially tailored its services for law enforcement, it soon adapted them to serve as compliance tools for banks and other financial firms. More recently, it says exchanges—where people buy and sell cryptocurrency—are now its fastest growing customer base.
According to Chainalysis cofounder Jonathan Levin, the recent downturn in the crypto market hasn’t had an impact on demand for its services.
“The business is growing faster than ever. The downturn has actually been good since exchanges are now focused on compliance and risk, and not just trying to onboard their millionth customer in a month,” said Levin in an interview with Fortune.
Levin did not disclose any specific financial figures for Chainalysis but said the company, which was founded in 2014, is already profitable and that revenue grew threefold in the last year. He added that Chainalysis has hundreds of customers.
Tracking New Crypto Coins
Until now, Chainalysis has only focused its forensic work on one blockchain—the first and most famous one, which belongs to Bitcoin. This work has included assisting the IRS to find tax cheats, and producing a highly-cited study, first covered by Fortune, that revealed more than 4 million Bitcoins are lost forever. (The total supply will only ever number 21 million).
But as the crypto market has matured, more people are using a host of other types of digital money besides Bitcoin. In response, Chainalysis says it will offer new forensic tools to track more than 10 other types of cryptocurrency, beginning on Thursday with Bitcoin Cash, which launched last summer as a spinoff to Bitcoin.
Chainalysis, whose competitors include UK rival Elliptic, hasn’t specified which other cryptocurrencies will be next, though Levin said they will be those with “bigger economic weight.” This is likely to mean that tracking tools for the likes of Ethereum and Litecoin are in the works.
Notably, Levin also said so-called “privacy coins” like Monero and Zcash are unlikely to figure in the new product offerings. Those cryptocurrencies are designed in a way so that individual coins are all but impossible to trace, and are gaining popularity with criminals looking to avoid leaving financial fingerprints.
In regard to ramping up its operations, Chainalysis says it now has 70 employees between offices in Washington, New York, and Copenhagen, and that it expects that number to grow significantly in coming months.
“We see ourselves as the builders of trust between blockchains, banks and governments,” said Levin.