Chainlink oracles to bolster AML measures for Coinfirm’s DeFi solution
London-based Coinfirm will now utilize Chainlink’s market-leading oracle service to provide anti-money laundering (AML) tools for DeFi projects, it said in a release Wednesday.
The firm will use Chainlink’s oracle network to bring their AMLT Oracle, an AML solution for DeFi, to the rapidly expanding smart contract and the DeFi economy. This would make Coinfirm’s AML data available on-chain and enable applications and/or users to add compliance as an optional plug and play feature when using smart contract applications.
— Coinfirm (@Coinfirm_io) October 28, 2020
Chainlink has seen unprecedented demand for its oracles in 2020, coinciding with the growth of the broader DeFi market. For the uninitiated, oracles are third-party services that fetch data from “outside” a blockchain to within, as the latter can only store data but not automatically verify its accuracy.
Using oracles allows Coinfirm to make compliance data and services available to dApps in a highly available and tamperproof manner. Additionally, Chainlink’s blockchain agnostic framework provides a preferred method of sharing the data across any blockchain environment, giving rise to on-demand compliance across ecosystems.
Coinfirm’s AML solution consists of a risk score for 270+ compliance indicator checks, blacklisted blockchain address checks, high-risk transaction pattern warnings, and more across the widest coverage on the market, the release noted.
“Coinfirm has been providing innovative solutions that enable more transparency and compliance for the unique needs of the crypto economy,” stated Jakub Fijolek, Co-Founder and CTO of Coinfirm.
“The next stage involves using Chainlink’s secure and reliable oracle network to make our AML solution available throughout DeFi, enhancing the ability for traditional financial players to adopt DeFi technologies.”
Making DeFi more secure
The solution allows developers to adopt a “plug and play” approach for compliance, instead of being forced to re-architect their existing smart contracts.
For example, an existing DeFi dApp adding in a small feature where a user can pay a compliance oracle to relay its data on whether or not an address has been blacklisted prior to sending it funds.
“It’s not hard to envision a scenario where a DEX or decentralized lending dApp uses a Chainlink oracle to bring an AML risk report on-chain to decide if an address is blacklisted before executing a transaction.”
Meanwhile, decentralization purists may question: Why bring institutional AML and compliance to the world of DeFi anyway?
For Confirm, the growth of the DeFi market increases the need to address compliance. “Currently, there are limited options for meeting AML regulations on-chain, particularly because compliance isn’t built directly into most smart contract protocols,” it noted.