What Chainalysis’ mega-round tells us about the crypto industry

Sign of the times: Chainalysis raised $100 million last week for a $4.2 billion valuation, up from $2 billion in March 2021 just months after reaching unicorn status—here’s what’s driving those generous investments.

What does it do? Chainalysis provides data, software, and research to government agencies, exchanges, financial institutions (FIs), and insurance and cybersecurity companies in more than 50 countries to help them with cryptocurrency regulation compliance.

It will use the funds to expand its resources and data to cover more cryptocurrencies and focus on use cases like decentralized finance (DeFi).

What’s its appeal? Crypto compliance solutions are increasingly in demand as regulatory oversight ramps up and blockchain services become more complex.

• More crypto regulations are on the horizon: The US Securities and Exchange Commission called for more crypto-focused legislation, and the EU is planning a regulatory framework for 2024. And while US regulators have only imposed $2.5 billion in fines on crypto firms in the 11 years since Bitcoin’s inception—a tiny sum compared with the $7.49 billion in fines paid by US FIs in 2020 alone—more regulation will increase the need for solutions like Chainalysis.
• DeFi has been touted as a solution that could bring greater efficiency to modern finance, but existing financial regulations typically don’t cover DeFi, which results in hurdles for the technology’s wider adoption. The likes of Chainalysis moving into DeFi can help providers conduct business intelligence, such as identifying anomalous transactions and scams.

Looking ahead: Chainalysis’ raise is one of many recent crypto mega-rounds, which may become even more prevalent in the future.

Peer-to-peer payments company Circle raised $440 million in May, and in March, crypto exchange BlockFi and crypto firm Blockchain.com scooped up $350 million and $300 million, respectively—to name a few.

And interest isn’t going anywhere: Venture capital firm Andreessen Horowitz recently revealed a $2.2 billion crypto fund after reports in March that it was aiming for a $1 billion fund.