Romania Looks To Lead EU In Crypto Crime Fight With ChainArgos

April 25, 2024
Romania has stepped up its efforts to tackle crypto crime with a first-of-it-kind partnership with ChainArgos, the blockchain intelligence firm that took down the Binance stablecoin last year.

Romania has stepped up its efforts to tackle crypto crime with a first-of-it-kind partnership with ChainArgos, the blockchain intelligence firm that took down the Binance stablecoin last year.

At last week’s Digital Innovation Summit in Bucharest, ChainArgos announced a commercial agreement with Romania's National Institute for Research & Development in Informatics, also known as ICI Bucharest.

The partnership will pave the way for two joint ventures: the Blockchain Intelligence Academy (BIA), which will train blockchain intelligence analysts; and the Crypto-Assets Investigation and Compliance Centre (CICC), which will assist regulators and law enforcement in using blockchain analytics in their work.

The CICC will design and implement blockchain transaction monitoring and reporting frameworks, the two partners said, and will tackle threats to both national security and financial stability posed by crypto-assets.

Why ChainArgos?

ICI Bucharest said it chose Singapore-based ChainArgos for the partnership due to its proven track record in providing “accurate intelligence” and “unbiased analysis” of serious crypto crime.

In February last year, ChainArgos made a name for itself in the crypto industry when its research was used by regulators to shut down the Binance USD stablecoin.

At the time, Paxos Trust was authorised in New York to issue BUSD on the Ethereum blockchain on Binance’s behalf.

However, ChainArgos discovered that between Binance had minted up to $1.4bn of BUSD on the Binance Smart Chain, without authorisation from any regulator and without reserves to back the tokens.

The New York State Department of Financial Services (DFS) picked up the research and used it to revoke Paxos’ authorisation to issue BUSD.

Binance did not dispute ChainArgos’ findings, and by February this year, support for the stablecoin was discontinued by both Paxos and Binance.

Needles in tech stacks

The discovery of Binance’s unbacked BUSD highlights how even major crypto compliance violations can go unnoticed, simply because those who supervise the markets are either looking in the wrong place or do not have the expertise or resources to look in the right place.

Jonathan Reiter, co-founder and CEO of ChainArgos, told Vixio that he stumbled on the discovery of the unbacked BUSD by coincidence after looking at the stablecoin’s reserve wallet.

During a panel session last week on "Bridging the Gaps in Blockchain Intelligence", other panellists agreed that there is no shortage of publicly available information in the blockchain world, but finding the bad actors within it can be a challenge.

Bogdan Vacusta, strategy consultant for digital assets at the National Bank of Romania, said that with so much information available, the real difficulty for regulators and law enforcement is finding the “right tools” to sift through it.

Help from private-sector firms such as ChainArgos can turn this raw data into actionable intelligence, he said, which will lead to more investigations, more enforcement and ultimately more compliance.

A three-track partnership

The three main aims of the partnership will be to fight crypto scams, combat Russian sanctions evasion and prepare Romania for compliance with the EU’s Markets in Crypto-Assets Regulation (MiCA).

In an official statement, the two partners said Romania has become a “hotbed” for scams operated out of the country, with scammers targeting victims globally but particularly in the US.

This has led the US Secret Service to open a branch within Romania and conduct multiple large-scale operations within the country, leading to the extradition of suspects to face trial in the US.

Patrick Tan, co-founder and general counsel at ChainArgos, told Vixio that Romania is taking a “proactive approach” to the prevalence of crypto scams and frauds within its borders.

“Although Romanians constitute the minority of victims from these scams, Romanian authorities are keen to ensure that such illicit activity does not find a safe haven in their country,” he said.

Russian sanctions evasion is another key concern for Romania, which has absorbed more than 150,000 refugees from Ukraine since the Russian invasion began in February 2022.

As covered by Vixio, there is growing evidence that Russian state actors and private firms are using crypto-assets to circumvent Western sanctions and fund the Russian war effort.

As reported by the Wall Street Journal (WSJ), Tether is increasingly being used to purchase weapons and dual-use military equipment from overseas buyers.

The Tether that funds these transactions is often obtained from sanctioned Russian crypto exchanges, such as Garantex, which is also closely tied to darknet markets, fraud networks, ransomware, money laundering and other financial crimes.

Tan noted that bad actors in crypto tend to be interconnected, both across jurisdictions and across different types of criminal activity.

Finally, the partnership aims to provide blockchain intelligence insights to Romanian firms and regulators to ensure compliance with MiCA, which is set to come into effect for stablecoins at the end of June and for other crypto-assets at the end of 2023.

Alexandru Petrescu, president of Romania’s Financial Supervisory Authority (FSA), said there is a clear need for “forensic” oversight of the country’s crypto markets.

According to FSA data, two to three times more Romanians invest in crypto-assets than in Romanian companies trading on the Bucharest Stock Exchange. In a country of 19m, Petrescu said that “millions” of Romanians have opened crypto trading accounts.

Even if many of these accounts are dormant, the number and nature of market participants remains difficult to quantify, as do the risks posed by crypto to financial stability and national security.

As such, Tan said he would like to see more jurisdictions follow Romania’s lead and invest in blockchain intelligence.

“We're here to help develop our capabilities together, not to make our partners dependent on a certain tool or certain way of doing things,” he said.

“We're all growing and developing and building in this space, so for us this is an ideal partnership and one that we hope to leverage to reach out to more governments, regulators and financial institutions.”



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