Chainalysis, a leading blockchain data platform, has announced launching support for the Lightning Network. The Lightning Network is a layer two protocol on the Bitcoin blockchain, enabling fast transaction processing.
Chainalysis notes that the integration of the Lightning Network will happen in February 2022. Companies that use Lightning nodes to process Bitcoin payments will have access to the Chainalysis Know Your Transaction compliance software with this integration.
Chainalysis to help Bitcoin transactions meet global standards
A Chainalysis spokesperson stated that with this integration, “there will be no change in the user experience of the Lightning Network.”
With the Chainalysis integration, individuals and companies that use the Bitcoin Lightning Network can share information with other businesses when making transactions. This will align with the FATF recommendation stating that crypto transactions of $3000 or more done through VASPs should be subjected to the travel rule.
The chief product officer of Chainalysis, Pratima Arora, noted that “the Lightning Network solves many of the challenges that prevent the Bitcoin protocol from being used for micropayments and other transaction types that bolster financial inclusion.”
Arora stated that the Lightning Network will allow customers to remain compliant when processing transactions. Arora stated that this integration will boost the network’s popularity and scalability.
FATF’s requirements for VASPs
The integration also means that virtual asset service providers (VASPs) such as exchanges will manage to process Bitcoin transactions in compliance with the global standards.
Under the guidelines of the Financial Action Task Force (FATF), the term VASP includes firms that offer digital asset services. The FATF is an international body that seeks to uphold best practices regarding anti-money laundering.
The FATF does not have the authority to issue fines. However, it has a listing for countries in its grey list that it believes should be subject to increased scrutiny or added to a black list. Countries or institutions that added to the FATF’s black list are usually faced with sanctions from leading economies.
The FATF also has oversight over crypto-based firms. In a recent update to its definition, the FATF noted that a VASP should “exclude ancillary participants that do not provide or actively facilitate any of these covered activities, such as entities which provide internet or cloud services.”
Therefore, the only crypto firms excluded from the FATF’s definition are developers working on open source projects or crypto mining firms.
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