Chainalysis Adds Support For Lightning Network Bitcoin Payments: Report

Chainalysis adds support for Lightning network bitcoin payments and via the Know-your-transaction compliance software, financial institutions that process BTC payments will meet global anti-money laundering practices so let’s read more in today’s Bitcoin latest news.

Blockchain data platform Chainalysis will add support for the Lightning Network as a layer two protocol on the BTC blockchain. The integration will make the platform compliance software available to companies that process BTC payments via the Lightning nodes. It also means that the virtual asset service providers will handle BTC transactions in a standard-compliant way, as one spokesperson said:

“There will be no change in the user experience of the Lightning Network.”

The VASP terminology which Chainalysis used in the press release came from the Financial Action Task Force guidance that was recently updated. The international body maintains some best practices for anti-money laundering. It can also issue fines but it keeps a gray list for countries that it feels warrant increased monitoring as well as a black list for those that are not cooperating. Landing on one of the lists seems to lead to economic sanctions from other FATF countries like the US.

The recent FATF changes alter the definition of a VASP to exclude ancillary participants that don’t provide or actively facilitate any of these activities like entities that provides internet or cloud services which could leave out the developers that contribute to open the projects and miners.
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The other change that updates the travel rule which pertains more to the kind of information that firms are able to collect with Chainalysis compliance software. The Travel rule requires the financial institutions to share data with other companies that are sending money and the FATF noted that data for crypto transactions of $3000 or more between VASPs will fall under the travel rule. The Chief product officer of Chainalysis Pratime Arora said:

“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. By enabling customers to compliantly support Lightning transactions, we hope to grow the network’s popularity and help it scale.”

The adoption of the Lightning Network launched in 2018 increased at a fast pace in 2021 with the number of nodes on the network growing by 68% a year ago according to Bitcoin Visuals. The Chainalysis spokesperson said the compliance capabilities of the Know-your-transaction don’t cover new tax reporting provisions in the $1.2 trillion package signed by the President of the USA.