In this compelling episode of Public Key, Eitan Danon (Content Marketing Manager, Chainalysis) speaks with Yaya Fanusie (Director of Policy for AML & Cyber Risk, Crypto Council for Innovation) to discuss the multifaceted dynamics of cryptocurrencies and their implications for national security, illicit finance and global policymaking.
You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 157.
Yaya leverages his rich background in intelligence analysis to emphasize the widespread impact of blockchain technology on economic security and policy, including the response of various governments to blockchain and illicit finance and the integration of innovative technologies in mitigating financial crime.
Listeners will gain an in-depth understanding of strategies from countries like Iran and China and how digital assets are reshaping the geopolitical landscape and creating modern day conflict zones.
Quote of the episode
”It’s not about the Benjamins. It’s all about the data.”….Data is the new electricity. Not oil… I kind of think data is going to power devices. platforms, AI, right? AI is nothing without data. Big data. And the Chinese government, the Chinese Communist Party saw this years ago.”
– Yaya Fanusie (Director of Policy for AML & Cyber Risk, Crypto Council for Innovation)
Minute-by-minute episode breakdown
2 | Yaya’s journey From CIA analyst to crypto and illicit finance expert
6 | How crypto has evolved in the world of National Security and illicit finance
13 | Balancing innovation and regulation in crypto ecosystem
18 | China’s digital currency strategy and Its geopolitical implications
23 | Data as the new electricity and currency in a digital economy
26 | Crypto’s impact on traditional finance and regulatory challenges
29 | Digital Asset’s dual role in conflict zones: Aid and illicit use
34 | Exploring financial crime and spy thrillers podcasts
Related resources
Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.
- Podcast: Illicit Edge: Breaking News for Financial Crime Professionals
- Report: The Chainalysis 2025 Crypto Crime Report (Download Your Copy Today)
- Blog: United States DOJ and FBI Seize Cryptocurrency in Major Disruption of Hamas Terrorist Financing Scheme
- Blog: What is Authorized Push Payment (APP) Fraud? Understanding Crypto-Related Scams & Prevention
- YouTube: Chainalysis YouTube page
- Twitter: Chainalysis Twitter: Building trust in blockchain
- Telegram: Chainalysis on Telegram
Speakers on today’s episode
- Eitan Danon *Host* (Content Marketing Manager, Chainalysis)
- Yaya Fanusie (Director of Policy for AML & Cyber Risk, Crypto Council for Innovation)
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Eitan
Hello and welcome to another episode of public key. I’m your host. Eitan Danon, I’m here today with my friend Yaya Fanusie, who’s the director of policy for AML and cyber risk at the crypto council for innovation. Welcome to the pod. Yaya
Yaya
Eitan, thank you for inviting me. Glad to be here, really looking
Eitan
forward to the conversation. So before we get started, can you walk our listeners through a little bit of your professional background and how you arrived at the crypto space? What has your journey been like?
Yaya
Well, my journey has been a circuitous route in many ways, but professionally, probably the what’s most important to your listeners is I used to work in the US intelligence community. I was at CIA, where I was an analyst, and I was there from these, these are early days for me in my career, 2005 to 2012 and I did a worked in a variety of areas. I was hired as an economic analyst, actually focused on economic issues in Sub Saharan Africa. That was what I was hired for. Soon I went on to become mostly a counterterrorism analyst. I was assigned to the ends to the National Counterterrorism Center, and worked on, these were the days of peak al Qaeda. So, you know, the 2000s spent some time. I did a three month deployment to Afghanistan during that time, but I focused on CT, as we call it, counterterrorism, for the bulk of my time. And I didn’t do anything with technology, per se. And I wasn’t, I wasn’t looking at terrorist financing so much. I was just looking at an overall plotting so and I didn’t know back then anything about Bitcoin or crypto, you know, wasn’t on my radar, just me personally. Yeah, some people might say, oh, did the CIA create? Wasn’t the CIA behind bitcoin? I love
Eitan
a good conspiracy. Yeah,
Yaya
you’re not gonna get any of that here from from me. So, right? So, but interestingly, you know, I left government for a few years and and I wound up working in the DC National Security Think Tank space. So outside of government, I was working at an organization called the foundation for defense of democracies, and there was a center called the Center on sanctions and illicit finance. Why am I, you know, saying all of this? I mean, the main point was, my task was to focus on economic security and national security. So economic issues, and I was actually kind of new, you know, new to the think tank world. I was just sort of finding my place, you know, now writing articles for the public, as opposed to, you know, you know, classified reports, etc. And I was just thinking about, well, what are the what are the threats, what are the trends that we should be on the lookout for, so that we could write about, so that we could, you know, talk to policy makers. And in 2015 I learned about Bitcoin. I mean, maybe I’d heard about it, but in 2015 I kind of like looked, looked into it, and was wondering about it. And, you know, this was when ISIS was big, right? 2015 so I remember seeing some headlines or some brief articles saying that terrorists are going to use Bitcoin, or terrorists are using Bitcoin, or are using crypto, and it was never substantiated, like this was all in the press. So being the, you know, you know, you can take a an analyst out of the CIA, but you can’t take the CIA analyst, right? I was thinking, Well, how could we substantiate that? I mean, I can’t just take these, you know, these rumors and you know, you know, these headlines which say, you know, bad actors are going to use crypto or terrorists are going to use it. I said, Well, what do we actually know? What can we study? So I just sort of kept that inquiry in my back pocket. I said, Hmm, yeah, that’s interesting. We should look at this. What if we do find terrorists using it? And for about a almost a year, it was in my back pocket. I kind of just sort of left it alone. Didn’t think about it. 2016 rolls around, and in 2016 I’ll never forget it was the summer of 2016 and I’m sitting in my office, and across my desk comes a press report saying that a one particular terrorist group, or this sort of consortium of jihadist groups was fundraising on Twitter. This was a mia Media Center, Mia media center, right, and they were the Mujahideen Shura Council, right, right, and they and so the news flash was that, hey, they were on social media. They were soliciting Bitcoin. It’s
Eitan
one of our oldest blog posts. I think it changes. It probably is
Yaya
because there, oh, there’s, oh, there’s even some backstory there. So maybe put a pin in that. Yeah, maybe we can come back to that. Come come back to Yeah. How some conversations I had with these two guys named Michael and Jonathan back in 2016 so let’s hold on that. But anyway, So lo and behold, I, you know, I saw the news report. Didn’t think too much of it. I said, Ah, is this another one of those news reports, you know, you know, saying terrorists might use Bitcoin. So I went away to lunch. But before I did, I told my two interns. I said, Hey, look into this media report. Let’s look at it, see if there’s anything there. And, you know, and then tell me what you get when I come back. I come. Back and my interns say, Well, yeah, well, we found the Twitter post and we scanned, we scanned the QR code that they were soliciting on Twitter. We found it, and we see blockchain dot info. Here’s where they’re raising Bitcoin. And this was for me, this was the moment. This was a seminal moment for me. I said, Well, wait a second. Wait. So this group, which we can pretty much verify they’re the ones using the social media handle. We know it’s them. They have a history, etc. So wait, you’re saying they’re raising Bitcoin, you know? And here is the Bitcoin like, this is, what is this? The address thing? And said, Yeah, this is. And I said, Well, have they raised any money, you know? And cue the beginning of my foray in the rest is history. Rest is history. Yep, yep, that so that’s how I started looking at crypto and illicit finance.
Eitan
That’s great. That’s a wonderful story arc. And we’ve certainly as an industry and ecosystem, I think, not only blockchain analytics, I mean, come quite a long way from that point. I want to expand the aperture a little bit. You know, beyond just terrorism, a lot of our research focuses on geopolitics and national security. And I would love to get your take on cryptos evolving role in the context of NAT sec. How do you see crypto? You know, there’s a lot of hot takes, lots of, you know, provocative, let’s call them talking points. What do you see as some of the major risks and benefits for governments when it comes to crypto being used for illicit finance?
Yaya
Well, we’re actually at an inflection point, I think, in the national security policy making world around crypto. And this has been quite an evolution, because back in those days, again, going a little bit back to the 26 the 2016 era, 2017 where the conversation was purely, how were illicit actors, national security threat actors? How are they using crypto? How might they use it? That was the initial thing. First, you know, terrorist groups, and then other groups, you know, sort of North Korea, sort of came on the radar a little bit later. But the posture or the tone of these conversations was always, you know, how do we stop these bad guys from using it against us or gaining funds from it so that they can, you know, they can, you know, do things against the United States, you know. And so that was the tone of the conversation. Now, as the years went by, policymakers started to look at what the what state actors started to do, which was not always just stealing crypto or hacking crypto, but using crypto themselves, mining crypto themselves. If you’re talking about, you know, Iran in particular, and, and, and North Korea, you know, hacking exchanges. And then there started to be a discussion about, well, will these state actors, state adversaries, use blockchain technology itself? Will they try to create their own tokens? You know, Q Venezuela? What happened in like 2018 and 2019 which is something I look closely at. They they launched what they call the Petro, right? Petro, right? Yeah. I mean, really, you look back, it’s like the first, you know. I mean, forget the you know. You know. It’s funny when Libra came up, not Libra, Facebook, Libra, Libra, the new Libra of 2025, Javier milay, right, exactly. I sort of had flashbacks. I’m not saying it’s the same sort of thing, but I was right, yeah, a government just heard this before we’re gonna launch this token and it’s gonna, you know, it’s gonna pay all of our bills. I was like, sounds like, Maduro, the
Eitan
IMF makes the difference Exactly. But get it,
Yaya
but get into your question about the evolution. But now, in 2025 we’re at a very different period, because there’s a new playbook that’s happening, I think, and it’s comes from what we see in the new administration, even though it’s sort of, you know, brand spanking new, the Trump 2.0 administration is the new playbook is on the US side. We’re seeing signals of the US considering, well, how can we go beyond just risk mitigation, risk management and illicit finance prevention? How can we use this technology? How can we, you know, whether you use the term be the crypto capital, but how can we leverage the technology now? And here’s the thing, after years of following and tracking adversaries dealing with crypto like this is actually what they did, is strategically so, a lot of state actors. You know, if you even with Russia, when crypto first got on the political radar, it was okay, this crypto stuff is bad. We got, yeah, down on it, right? You know, same thing in Iran, another good case, right? Which is crypto stuff. Pretty soon you see mining happening in in Iran. You see Iran leveraging crypto. You see a whole growth of looking into blockchain technology and crypto it’s becoming because there is the the these governments saw that. Well, you know what this stuff is here, why don’t we use it to our advantage? And, yeah, that may mean it helps us against our adversary. So what’s happening now in the United States, for the, you know, the in recent years? I mean, you know, not to get political. Anything, but just in terms of stating the fact, actually all previous administrations up until now, right? The Trump administration, the first one, and then the Biden administration, really intensified. Was this illicit finance prevention focus, like crypto is is bad. You saw that a lot in the in the previous administration. And so now we’re seeing this shift, even if some of it is rhetorical, but we’re seeing a tone which is, hmm, let’s think about how we could use that, this technology to our strategic advantage economically. And that’s, that’s a shift, and that, I think, the the page there hasn’t been written. So I mean that we’re still, you know, we’re still looking at what this means. But I think there’s a different approach that we’re we’re seeing coming out of the government now,
Eitan
awesome. Yeah, I think there’s, there’s a lot to be monitored and analyzed, but certainly an important dynamic. So a few weeks ago, we released our flagship publication, the crypto crime report for 2025 you know, we analyzed the illicit finance nexus to crypto, everything and anything from ransomware and sanctions evasion to organized organized crime, extremism and beyond. Given your policy experience and focus, it would be great to get your take on how you see governments around the world responding to the challenge of illicit finance on chain. I mean, you mentioned a few cases just now, Russia is about face Iran, you’ve done a ton of research on China. It would be great for our listeners to get you know if there is a TLDR on that, but I think that probably begs additional analysis and more insight than just the TLDR. And are there specific countries you see leading the way or cracking down and kind of unintended consequences? How do you see this landscape?
Yaya
Yeah, right, that’s, there’s, there’s a lot to say there. And I’ll have to admit, I mean, my sort of caveat with everything right, is my visibility is limited, right? I’m no longer in government. It may not even be on the pulse of certain, you know, developments that could be happening so, right? I may see things from afar. But one thing that I do notice maybe a couple of things. So one is, especially since I’ve been looking at this for, man, almost 10 years now, probably the big thing that has that has changed has been the sort of expertise that we see governments have, and not just the big countries that you’ve named. I mean, probably the biggest issue is that most countries in the world, crypto is still something very new that they’re trying to get a handle on. So from a regulatory, regulatory perspective, but also from a financial crime prevention perspective. And I remember, you know, six, seven years ago, I did a briefing at National Defense University. And this was when I was, you know, I was doing a lot of briefings in, you know, the 2017, 18 period about, what is this crypto? What is Bitcoin? What is crypto? What are some of the illicit finance risks? What are people doing? And I’ll never forget after, and it was the audience was it wasn’t just military, it was Financial Intelligence Unit officials from various countries, and law enforce and other law enforcement officials. And one guy from Ghana came up to me afterwards. He’s from Ghana, and he’s from the FIU, and he was like, their cyber guy, right? So this is the guy who’s dealing with cyber, and he comes to me and he says, Mr. Fauci, what we’re just getting a handle on, on, on XYZ. Now you’re bringing this crypto
Eitan
stuff where you just doubled my portfolio. Thanks so much.
Yaya
Thanks so much. And that was years ago, right? And I said, I’m sorry, but this is, you know, this is what you have to be aware of, right? You know, now, years later, countries like Ghana, countries in, you know, in Sub Saharan Africa and all over the world, sort of have a sense of what the tools are that this is, I mean, there’s still gaps, obviously, and this is probably the biggest thing that you know, international bodies like the Financial Action Task Force, which you know, oversees and sets standards for for AML and CFT, those organizations are seeing that, that that countries need the tools. So, expertise, tools, technology, those are the things that I think are much more prevalent now. Now, in terms of, it’s difficult to say who’s who’s who’s setting themselves apart, but I will say this. I mean, this is something to look at when you when crypto is global, right? Crypto is global. It doesn’t really have borders. So what you find just look at some of the press releases every time you see a big bust of some sort of, you know, cyber, some cyber operation that involves crypto, whether it’s, you know, any illicit finance operation could be, you know, connected to a whole bunch of different illicit areas. You often will see that these are international joint operations where jurisdictions are working together. So, you know, Europol might announce something, and it’s, you know, but it’s not just Europe. It might be European agencies, with the United States, you know, with with, you know, with Australia in the US, right? You often see, you know, when there’s an. International case, right? It’s the cases are brought down because or these, these targets are brought down because of cooperation. I think that’s probably the biggest thing that I would say countries, you know, the successful countries are doing is they’re not addressing illicit finance within a silo of, okay, our agency has to tackle this, it’s all through joint operations, working with task forces, learning, getting training. So that’s probably be the the key, because there certain, you know, you can leverage other your partners a lot more than just trying to attack things through your own through your own borders alone.
Eitan
Great. Well, on the you know, innovation front, like the countries that are doing more and some of the risk that comes along along with that, you know, one of the things, one of the many things you look at is tech and regulatory innovations, kind of and two sides of the coin. What are some of those innovations that you see emerging to mitigate risks of misuse by crypto? From our angle, we recently acquired hexagate and alteria, which are two cutting edge web three companies. The first kind of focusing on, you know, post tax and exploits. The second one leverages AI to look at scams prevent scams, both of them heavily focused on prevention, so not just responding to not just responding to illicit activity, but the full life cycle of investigations, risk mitigation and prevention. How do you think policymakers can strike a balance between promoting innovation, the climate in the US that we have right now and globally, some of these tailwinds, and protecting consumers, protecting national security. Do you, you know, people always say there’s, there’s a great tension between the two, but can the needle be threaded?
Yaya
Yeah, it’s a tough it’s a it’s tough to thread that needle. Or it’s very tough, because the tensions between, you know, innovation, privacy and illicit finance, you know, are big. And I think what I’m seeing is two parallel innovation tracks, and it’s what we see happening within industry, and also what we see government thinking about now, the things I’m going to mention, some of them, are more on the frontier side of things, like you’ve mentioned, things which you know are running now. And you know, obviously you all have you bought certain companies because their their tools are out in the field. But I think what I would point people to is a different parallel track of innovation happening to mitigate illicit finance. So what are those two tracks? One is, I think what industry is already doing within the crypto industry, specifically to keep illicit actors from, you know, from their platforms. You know, last year at crypto council for innovation, we released a crypto illicit finance Risk Management Guide, and it’s basically a one pager, and it shows all the different things that industry is doing or can do to stop illicit activity or try to hinder illicit activity, and some of it is just your basic I mean, obviously you start with centralized exchanges and what they’re already doing with just AML Compliance, right? But then you get, once you get more into the decentralized space and decentralized applications and protocols, you get more into some of the cryptographic tools that are being experimented upon, right? I mean, your listeners will have heard about zero knowledge proofs, you know, I’m sure plenty, right, right? That’s just one example of a cryptographic tool that, you know, is sort of Frontier which is being experimented upon, a lot of pilots and research. But those types of things are things that can be built within crypto ecosystems, Blockchain ecosystems to try to have some level of, you know, if it’s not compliance per se, it is mitigating risk, you know, and other things, there are things. There are cryptographic tools that are used to what I call like proof, proof of status. You know, there are different, again, cryptographic tools which are used to try to associate certain qualities. So you could do that in a decentralized protocol, to sort of segregate certain types of funds
Eitan
from providing an AML check without giving up PII, something like that. Yeah, right. So you have
Yaya
all of that going on. So a lot of that stuff is is being researched or is being worked on by even by industry, right startups are doing. So that’s the one thing. And I actually think that that, I think that’s key. I think we’ll probably come back to that, because, you know that frontier space relates to, how do we how do we keep privacy in a more digital environment, in a digital finance environment, that, honestly, to me, is like the theme I would want to leave people with, which is, finance is getting more digital. We’re using different systems. We’re using different technology to transact. So in that environment, we’re gonna have to have ways to preserve privacy. You know, this is not just the anarchist, you know, who you know, ultra, ultra libertarian or anarchist, you know, who’s just like, I don’t want you know this. These are like,
Eitan
this is gonna It’s a practical question around how to scale it. You know, how does that. Scale Exactly. So
Yaya
that’s one. So I’ll put that as one thing. But then there’s the other thing, which is also just being talked about in policy circles. I’m not saying I’m endorsing it, but here’s, here’s a concept that people are talking about, which is embedded supervision. Embedded supervision is the idea that you can take these protocols and then what you could do is you could actually insert regulatory compliance within smart contracts to help with the monitoring, to help with compliance. Now who’s thinking about this? Obviously, the regulators are thinking about this. This is happening, happening a lot in Europe, so, but that’s the idea of, hey, people see this technology. They see the innovation possible, and people are trying to figure out, how can we use these systems to help police, you know, to police them and to keep illicit activity outside of
Eitan
them, right? Those are, those are great suggestions. And I encourage listeners to give both of those things at Google, I think, not only on CCI website, but lot, lots to chew on there. So I want to hyperlink back to something we touched on briefly, and you mentioned pilots now, which made the synapse fire in my brain. So China, China is advancing its cbdc, the digital un right, the ecny, you have done a ton of research on China, and are very outspoken and knowledgeable about digital finance, technology writ large, but certainly digital assets. In the People’s Republic of China, we had Matt pines on the pod a few weeks ago. I’m from Sentinel one, to talk about how the different pieces fit together. You know, he’s done a lot of research on what he calls their techno authority, techno authoritarian tech stack. Or, you know, everyone has their own nomenclature, but it would be great to get your take on how you see the ecny impacting not only global crypto markets, but kind of on the geopolitical front. You know, we’ve had China kind of evolve from a full ban, you know, on permissionless things, to robust adoption on permission networks. And now we see in our GEOS report last year, China coming up in the top 20. You know, very active, lots going on, more than would meet the eye. And so enter someone like Yaya to help our listeners break it down. Yeah.
Yaya
Well, the ecny, there are a few different sides to it. I mean, your maybe your initial question about, well, how will the ecny impact? You know, crypto globally, crypto markets, etc. Excuse me for that, I would say very little, because the ecny is, that’s China’s cbdc, and it’s a retail. It’s a retail for now, mostly it’s, it’s being used for, for domestic person, consumer payments, not
Eitan
central bank to Central Bank for the most part, for yes, for the most part.
Yaya
Now we’ll get to that central bank part, but, but what they’re the pilot is mainly focused on that, and it has a very small footprint, even now, right? It’s been a couple of years, and they’re slowly doing it. There’s really no rush. I mean, right there. I think what the for, for the People’s Bank of China, their central bank, you know, they’re doing this for research. They’re trying to see how it works. They’re probably fine tuning in. I mean, there’s no rush, right? They can just kind of let this out. It really has a domestic focus, but there is an international component to what China is doing around CBDCs that I think the US in particular needs to pay attention to, which is, China is using its, you know, its, I guess, success, or its progress with CBDCs, to coordinate and collaborate with other countries to develop international, cross border payments of wholesale cbdc transaction. So to break that down, what I’m talking about is, excuse me, what I’m talking about is, for one, there’s a pilot project called Enbridge, right? And Enbridge very interesting. I mean, you may, you know many of folks have heard of it, but in a snapshot, right, it’s, it’s a cross border blockchain based platform where a few central banks, including China Central Bank and a few other countries, are experimenting with doing facilitating big transfers, transactions cross border. So if you’re in Thailand and you want to trade with someone in the UAE, you go to this platform, and then you’re able to do a big transaction. Now the thing is, what are the implications? Well, this is really in a pilot form. It’s a substitute for using the correspondent banking system. If there’s a transaction between Thailand and the United Arab Emirates, I don’t have to necessarily go to a bank to look for dollars to facilitate that transaction, because the dollar is more liquid, and I want to in most banks have dollars. No. Instead, I go to this platform, and the platform just does like their own atomic swap between your currency and their currency in a cbdc form. Now you’ve simplified the cross border trade process. Now this right now, it’s a pilot, and it was under the Bank for International Settlements. Now it’s gone on its own. The BIS, as it’s called, has sort of removed itself. Now I think it’s. Going to be really driven by China. So the implication there is that you have other countries friends and foe, right? It’s not just China doing this. Other countries are trying to figure out a more efficient way to do cross border transactions. They’ve learned from crypto. They’ve seen. I mean, if you want, if people wonder, like, how is crypto influenced central banks, crypto has spurred them to consider innovating a little bit more. CBD sees you know whether you like them or don’t, they’re a sign of innovation. So the big implications there are, wow, if there’s a vault, if there’s a viable alternative for cross border payments, then the US has maybe the potential to lose some of its sanctions prowess, its potency. And economic statecraft, you know, economic us. Economic statecraft relies on us strength within the financial system, and this could undermine it.
Eitan
That’s great that these, you know, certainly Enbridge and a lot of these dynamics seem to be coming up more and more, and certainly on a lot of the episodes I’ve been hosting and asking this question. So thank you for that. What about interoperability with other you know, China is not afraid of embracing emerging technology, certainly on the AI front, hardware, software, and otherwise they have they are full steam ahead, quantum research, you name it. And you know, a chain analysis we view blockchain and crypto is one of several critical emerging technologies in this great conversation. Can you help our listeners situate, perhaps digital assets in the PRC against the broader backdrop of emerging technology?
Yaya
Yeah, well, the way to look at it, I’m glad you you use you framed it that way, because what’s happening with China, around cbdc, digital assets and fintech in general, it’s not about money, it’s not about currency, it’s about data, data, right? It’s all about the data. I mean, as I say, it’s not about the Benjamins. It’s all about it’s all about the data, right? I mean, just look at it, and you can peel
Eitan
by saying, data is the new oil, right? Everyone, everyone gets up and says that. But I think you know, but you know what asset of the 21st
Yaya
century? Well, you know, I so I have another, another sort of saying for you. I say, data is the new electricity, not oil. And I say, electricity. Why? Because all of our devices, you know, everything we use, all the appliances, they’re powered by electricity. I kind of think data is what is going to power and what powers devices, platforms. Ai, right? Ai, is nothing without data. Big data. And the Chinese government, the Chinese Communist Party, saw this years ago. In fact, there’s a, there’s a great random report. Oh, man, I might, I don’t know if I remember the title, but it’s about China and big data analysis. And it’s maybe from 2020, I think. But it looks back in the sub the previous years, and it says that you see all these statements coming from from the Chinese Communist Party, saying, we need to focus on data. We need to build a big data, data analytics and artificial intelligence is really just the step from that right that you if you have data, if you’re able to analyze it, you can leverage it in smart ways. You could build smarter systems. So of course, one corollary here is what happens to finance then you want a more database. Finance you want. And it’s not just you want data, but the Chinese government’s way is, well, the state should control the data. The state should make use of it for the state’s interest, whatever the state wants to do. So you should have a system where data comes to you, data is collected, take, data is aggregated and analyzed. And that’s that’s really the the the framing of what China is doing. It’s not about money. It’s not even about, oh, making the the yuan be more attractive than the dollar. That’s not the that’s not the game that they’re playing. They’re playing they’re in a lane. They’re actually playing a game that I think they would assess, that the US has been asleep at the wheel in terms of with data, digital finance and organizing a system so that you’re able to leverage data. The US doesn’t have that sort of vision or plan, right? We’re not a centralized authoritarian state. So we can’t just have one, you know, up from up top ordering the entire economy to act in a certain way, right? We don’t have a command economy like that. So the data driven or data focused. Economy is what’s driving all of this. And digital assets fit, really. They fit into that because digital if you’re going to have an economy that is programmable, that is always on, right, that that in can be transparent, whether it’s transparent to all the people or transparent to certain people that want to manage it, right? Digital assets, blockchain technology, enable that. So I think that’s where, getting back to our initial question. I actually think that that understanding may be coming to the US now, because again, before it wasn’t so clear people, a lot of people, just sort of said, dismiss crypto. Oh, crypto is just this. Terrible stuff. Now people are saying, well, you know what, this technology makes sense, and crypto may bring something that we need. The question is, how do we want to use it?
Eitan
Right? How do we harness its potential, rather than adopting what you described as more of a threat centric analytic paradigm, kind of embracing the potential? Well, you mentioned the, you know the correspondent banking system, the plumbing of the dollar denominated international financial system you at the CCI. And I think in general, you spend a lot of your time thinking about AML and the practical implications going into tradfi. A little bit how, from your vantage point, how has the rise of crypto kind of played into Trad. Fi’s evolving. Let’s call it position, especially, you know, compliance wise, monitoring, AML enforcement. What do you see as the main dynamics that our listeners should be paying attention to in the year and in the years ahead?
Yaya
Yeah, I mean, it’s, I mean, if you’re talking about the private, banks. You know, one thing I’m not trying to down put to put, to say bad things about certain industries, whatever I mean,
Eitan
challenging things, disclaimer is on its way.
Yaya
I mean, the only thing I would say is, you know, it’s unfortunate that the private in tradfi, traditional finance, you know, you see the private banks really playing catch up. I mean, they’re there. I mean, it’s funny. It’s like, central banks, who you expect to be the least innovative and the most behind? Central banks actually
took the first let’s get a sandbox going,
Yaya
you know? I mean, like they’re doing so they’re like, hey, you know, let’s do XYZ. Let’s learn about I mean, 2014 the Bank of England put out a paper about Bitcoin and like this technology right way back then, not what you would expect, and that would you would expect, and, you know, I’ve witnessed in in the private banking just, I mean, again, made a lot of them, it would say that they have their hands tied behind the bank, because of regulators, because of lack of certainty, right? Not right, you know. But if anything, though, if I would say, in terms of, how are they learning benefiting? I think with crypto is opening up everyone to a different like, you know, a new data source and even a new way to look at or think about, you know, what’s possible in terms of transactions. It’s interesting, man, is this public? I’m trying to remember if this is, yeah, I think it’s public. I think the letter went out. I don’t think I’m I mean, I saw recently a set of banking trade associations, right bank lobbying groups, recently put out a letter to gosh, where did the letter go? To the letter? Did it go to Treasury? But it was an open letter, because I saw the letter urging, of urging regulators to allow them to basically, you know, deal with crypto. And this is how this is, as of, like last week. This is very recent, and what and actually making arguments that the crypto industry had been making about, you know, if we don’t sort of take off these onerous restrictions, we
Eitan
will miss out unless this will allow us to partake. Yeah,
Yaya
so the banks are like licking their chops. We need to find
Eitan
alpha, but you need to let us do it without, you know, without our hands tied behind our backs Exactly. So
Yaya
I think what happened? I mean, you know what happens when you start looking at when you get into crypto. So even if your traditional finance, it does open up things. I mean, I think it opened it opens up you to think more about using data analytics, maybe more. I mean, obviously data analytics are, is being used now in compliance, but I think crypto, because it’s so database analytic, you know, analytically based, there’s just a certain, you know, greater proficiency. It’s going to force you to start thinking more about data. I think it’s going to have you think more about AI, if you, if you’re not already, just because it is, you know, it is the finance of the internet, right? It is the native finance of the internet. So if you’re a tradfi, you’re, you’re trying to think, How can I kind of work in this, even if I’m not, you know, dealing with crypto directly, you’re, you know, how can I bridge that gap?
Eitan
Absolutely. Um, there’s a lot to chew on there. I think at chainalysis, you know, we spend a lot of time thinking about these kind of complex questions and how our solutions and data can shed light on, you know, big data type questions. How can we leverage this to anticipate and predict and prevent, but certainly a lot there I want to, I want to pivot back to the conflict zone so we have and continue to research. You know, we’re analyzing crypto and its use by groups that are active in a range of conflict zones. You know, we had the surprise implosion of the Assad regime in December, certainly the events of the past year, Hamas and the Iran Israel and proxy war across the Middle East. We’ve put out quite a bit of content on Ukraine and use by pro Russian militias who are fighting in Russia’s war on Ukraine. How do you see a. Um, these use cases impacting the prospects for adoption and for regulation. I think you, more than most, and more than many, have the perspective, not only on the NAT SEC front, but on the regulatory and policy maker thinking pulse. I know you said you don’t have your finger on exactly on the pulse, but I think you you know quite a few, quite a few thing, you know, you know a thing or two. So how do you see those pieces fitting together? Do you think, you know, the naysayers will take these use cases and say, Well, I told you, so, this is for, you know, this is for pro Russian militias. This is to undermine the role of the dollar, etc, etc. Or can we say, well, I mean, I remember in Ukraine, Vitalik, you know, he’s, he went on Twitter and said, I, I used to, well, this was after the tornado designation, but I use this to make a donation, you know. So, how do you, how do you see this? Yeah,
Yaya
I mean to say that all of these examples are just, you know, proof of the the illicit activity or the downside, I mean, is, you would only say that if you’re, you know, you got, you know, one one eye over, when I close, you know, right? You’re trying to selective reasoning. It’s very selective. I mean, honestly, there’s a, there’s a bit of a blossoming and blossoming, you know, on all sides, right? Which is when you know, again, necessity is the mother of innovation, right? Or invention mother of innovation as well. Right? Innovation, necessity is the mother of innovation. There’s a new Can I trademark that? Sure,
Eitan
lots of quotable quotes, right?
Yaya
Yeah, honestly, because if you think about it, right, what do folks who are in need, what do they do? Right? They’re thinking of what’s the best use? How can they adapt, right, to a to a bad situation, you know, what can they take in limited resources? And, yeah, you saw that in with with Russia, Ukraine, right? The first thing you you saw with crypto was people doing fundraising to send to Ukraine, right? That was quicker than you if you had done just a traditional, you know, Trad five, Western Union, right? Exactly, you know, even go fund me or something, right? I mean, this was like just instant that, you know, come from all over the world, and so you’re gonna see, you’re gonna see examples like that, and I, you know, in any conflict, right? You know, yeah, the you know that bad guys or the adversaries are going to be, you know, trying to fundraise or launder through crypto. And then an NGO, a non governmental organization, a terrible organization that’s trying to do something for humanitarian aid is also going to try to figure out how, how can we use stable coins, or how can we use, you know, crypto for, for, you know, to get to people that need it. You have all of that happening, you know, simultaneously. So I don’t think it’s, it’s mutually exclusive. I would say that, you know, there’s probably always going to be room for the gray area, gray markets. I mean, you’re going to have, I think, you know, the regulated space grow, you know, meaning that more places are going to be regulated, more Institute, more sort of institutional acceptance of the technology, right? Because, I mean, there’s, there’s a bottom line benefit of doing it, but you always also, unfortunately, or just as a matter of fact, you’re going to have unregulated spaces that doesn’t go away because it hasn’t gone away in our traditional modes of finance, either. So you’re going to have it. And I think the challenge for law enforcement is going to be okay. Well, how do you accept that reality, and then how do you dress it? Because you have to, honestly, you have to go for the illicit activity in both spaces, both space,
Eitan
every time a G SIB or a giant bank is fined to the tune of millions, or even, you know, even more, you know we, you know, we don’t point the finger to say, haha, but I think in the crypto space, and there’s no shortage of hacks and incidents and the like, yes, it’s unfortunate. Yes, more needs to be invested in security and awareness, etc, but the transparency of the blockchain is something that really, there’s no direct analog and tradfi. And so, you know, while these are issues to be worked through along the lines of the issues we work through in web two, you know, it certainly empowers stakeholders in a way that we might not have had as recently as 10 years ago. Yeah,
Yaya
and, and, you know, it’s, it’s also maybe a lot of people don’t think about this. I mean, you know, the skeptics and, I mean, I think it’s good to be a skeptic and to be a critic, right? Because we have to remain honest. A lot of people for don’t think about how regulating a space, more, you know, entering firms into the regulatory perimeter, having clear rules, that actually is a strategy to minimize some of the illicit activity, because you have an environment where there are certain rules, and honestly, when there are more rules, right, a lot of the you know, more of the scammy stuff and the illicit stuff has to either go away or it’s harder for it to survive. I think a lot about this is very real, like one of the biggest. Things. And I know your your reports have have shown this in recent years, scams are some of the biggest, that’s the biggest portion, or has often been some of the one of the biggest portions of illicit transactions, right? I mean, it’s huge. And there’s explosive
Eitan
growth in fraud and scams. And you know, when I talked about the hexagon alteria acquisitions, you know, that’s a part of it. But certainly those threat actors are leveraging AI. I would encourage our listeners to check out the scam section of the crypto crime report. But precisely those following, you know those actors, regulators, policy makers, public and private sector, can also use technology to, as you say, to kind of take a little bit of the oxygen out of that ecosystem. Yeah,
Yaya
and, and you, and also thinking about the victims when, when they’re getting caught up. One of the reasons why it’s so these are so prevalent is because of all the activity happening in unregulated spaces. So let me just give like, a couple of, you know, personal anecdotes. I mean, just people that I know, people close to me, who I’ve known for years. In the past year, you know, have reached out. Family members have have reached out, because they have been involved in these crypto investment groups, and so they started to tell me about them. And one of the things that they would say, we’re
Eitan
an audio podcast, but for our listeners, both of our eyebrows are raised, right?
Yaya
Yeah, let me tell you what they would say, yeah. So I got into this, this crypto Investment Group, yeah, you know. And we’re doing all of you know, it happens on WhatsApp, and all of the conversation on WhatsApp, and they’re talking about investment. And my mind, I’m like, no, wait a second. A legit, a legitimate sort of, you know, investment company is not going to be sharing its they’re not going to have their main activity and outreach to investors in in WhatsApp, be for a lot of reach, just a lot of reasons. You can’t do that with your customers, etc. That is an indicator that something is wrong. This may not be a legitimate investment. It’s it’s probably a scam. And so, so, but the reason is, right, we have to have more regulated spaces. And then the people who are interested, they know where to go. But so, so that’s, you know, there’s this, there’s, you know, we should embrace regulation in the in, you know, for what it can do to keep people from being victims, to providing a sort of a safe place. Now, there’s always going to be the underground. I’m not saying get rid of the underground, but again, when the mainstream is like not going to a lot of you know the mainstream, the people that we know and love, our folks, are just going to whatever because of the lack of guardrails, then that’s an issue,
Eitan
right? Absolutely, a little bit of action would go a long way, I think, in terms of shrinking the attack surface, or at least making it harder for threat actors. Well, this has been an awesome conversation, I think, before we drop I feel a little bit like Daniel interviewing Mr. Miyagi here. Can you, can you tell our listeners about your podcast work, not only with illicit edge, but also the Jabari Lincoln files and a little bit about that. What you focus on, how you came to that, and where they can listen to your content? Yeah, yeah.
Yaya
I’ll start with most recently. So I teamed up with the illicit edge Media Network, which has a newsletter on financial crime, great for folks to subscribe their daily newsletter on illicit finance. We started a a podcast on illicit finance called designated, which I host, and it’s about financial crime fighters, and we’ve talked to quite a few folks that deal with crypto. We had Aaron West with pig butchering on there. We had, she’s great,
Eitan
yeah, Ian Andrews, who was our previous host, he Yeah. He interviewed her. She’s terrific.
Yaya
Yeah. We had an episode where we talked to one of the undercover agents who brought down the Silk Road. The Silk Road, which is very which is up in the news for, you know, for for a lot of reasons today, yes, but designated, yeah, is a, is is a. It’s about the stories behind fighting financial crime. And so folks can find, just find that on their podcast or on YouTube, it’s also a video on YouTube. And before I started doing designated I had a podcast. I did Season One of a podcast called The Jabari Lincoln files. Jabari Lincoln files, it is a spy thriller with a crypto FinTech theme. It’s an audio spy thriller that I put in a podcast format, and from what people have told me, it’s very cinematic. It’s not like just an audio book. It is a move Ryan, move over Jack. Ryan, I hope it’s and so, yeah, it has a protagonist who’s a former CIA, who’s a CIA analyst who gets caught up in an interesting global financial conspiracy. So folks can find that as well on there, wherever they get their podcasts.
Eitan
Excellent. Well, thank you for that, and thank you for this terrific conversation. And looking forward to feedback on the episode. I’m sure there will be some. Absolutely,
Yaya
it’s great to be with you. You all are doing great work, and thanks to you and to your audience,
Eitan
awesome. Talk to you later. Yeah. Yeah. Thanks. Take care.
The post Crypto in Modern Day Conflict Zones: Podcast Ep. 157 appeared first on Chainalysis.
