As global financial institutions become more interested in bitcoin and blockchain technology, some are beginning to invest and work with startups they believe will empower them with the tools to one day engage with the industry.
Today, this means partnerships like that between UK banking giant Barclays and bitcoin compliance startup Chainalysis. The two companies announced in October that Barclays would work with Chainalysis, a graduate of its New York-based FinTech accelerator, to allow its financial crimes division to better understand the technology.
Now, there are signs that this partnership may be the start of a larger strategy that could be embraced by major banks. For example, Israel-based bitcoin compliance startup Polycoin was recently accepted into two incubators, one backed by financial services giant Citi and the other by Nordic banking conglomerate Nordea.
Speaking to CoinDesk, Polycoin CEO Alfred Shaffir indicated that he believes partnerships with compliance startups will be a necessary first step for any bank seeking to become more active in their work with the technology.
Shaffir told CoinDesk:
“We feel that the moment [banks] start working with the blockchain, they will need a compliance tool.”
Polycoin touts a full solution for blockchain compliance, with Shaffir noting that the firm wants to become the NICE Actimize for bitcoin, a nod to the digital financial crime prevention tool founded in the late 1990s.
The startup was selected to be one of 10 participants in the Nordea accelerator this October, and was chosen out of 170 applicants. The company is also simultaneously participating in the Citi innovation accelerator, its fourth in Israel.
Timely pivot
Originally founded as a bitcoin payment processing startup in 2014, Polycoin pivoted this summer amidst the overall downturn in consumer bitcoin spending.
“Bitcoin impacted our decision. We understand that there was a huge problem creating an economy around bitcoin,” Shaffir said.
However, Shaffir was able to identify a potential use case for part of its existing payment processing product. In addition to a merchant tool similar to those offered by BitPay and Coinbase, Polycoin allowed compliance officers at retailers to learn more about where funds they received were originating.
“We decided not to focus on the bitcoin itself but rather on the technology supporting it,” Shaffir explained. “So we took the core technology, now it’s not a merchant tool, but it’s a tool for compliance officers within banks.”
Shaffir views Polycoin’s advantage over its competitors to be its focus on know-your-customer (KYC) compliance as opposed to strict anti-money laundering (AML), and its ability to deal with potential identity fraud.
Polycoin said it expects to graduate from the Citi accelerator in December and exit the Nordea accelerator in February.
Accelerator image via Shutterstock