Blockchain Data Platform To Enhance Lightning Network Functionality
Chainalysis, an on-chain analytics platform, has announced that it will launch a lightning network payment feature before the end of Q1 2022. Once this feature becomes available, firms that process payments through the lightning network will upgrade their payment process through the know-your-transaction compliance app.
Details About The App
A side benefit of this app is that exchanges and other VASPs can now accept BTC transactions in compliance with standards of operations worldwide. However, one of the Chainalysis reps confirmed that the user experience for making payments through the lightning network would remain the same.
Chainalysis used the term VASP when referring to exchanges in its official statement because that is part of the new requirements from the financial task force (FATF). The FATF released an update to its anti-money laundering best practices two months ago.
While the international body isn’t yet empowered to fine any erring firm, it has a list of companies in specific nations that it constantly monitors and a separate list (called the blocklist) of those who would be prosecuted once given such powers. Any firm on the blocklist is forwarded to member FATF nations with the ability to probe such companies and might take years before FATF removes them from their blocklists.
FATF’s Updated Guidelines
The newly updated FATF guidelines exclude crypto-related organizations whose services are not financial-related from the list of VASPs. For example, those that only provide cloud- or internet-related services. Also, the list developers who only offer tech support for miners and open-source projects. The ‘travel rule’ is another significant addition to the FATF guidelines. This rule focuses on the information companies are meant to collect when a financial transaction between at least two VASPs occurs.
The good news is that they can collect such information through the Chainalysis compliance app. According to this rule, VASPs are mandated to share international crypto transactions worth at least $3K with the FATF. However, VASPs may not disclose any transactions not worth up to that amount with the international body.
Enhancing The Lightning Network’s Functionalities
A top-level executive with on-chain data analytics firm, Pratima Arora, stated that “the lightning network payment solution enables BTC for various kinds of financial transactions, especially micropayments.” “Hence, we hope that our compliance app can help the growth and scalability of lightning network transactions.”
The lightning network was launched three years ago, but its adoption has grown fast this year, more than the previous years combined. Bitcoin visuals data reveal that there has been an almost 70% increase in the network’s nodes. Two reasons attributed to this increase are the implementation of twitter’s BTC tipping functionality and El Salvador adopting BTC for payment settlements.
There has been an almost 130% increase in the number of active nodes on the lightning network between January and November. However, Arora was quick to clarify that the compliance function of the Chainalysis app doesn’t cover tax reporting requirements included in the US’ infrastructure policy which its president signed in November.
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