Building trust in crypto with Jonathan Levin of Chainalysis

Late last week, U. S. Securities and Exchange Commission chair Gary Gensler said that he was “proud to serve” the agency, which some are taking as a hint at an upcoming resignation. Gensler has faced heavy criticism for his crackdown on crypto, including a recent lawsuit from 18 states, and is likely to be replaced under President-Elect Donald Trump who has vowed to oust Gensler. On Tuesday, the Wall Street Journal reported that Trump is meeting with Brian Armstrong, the CEO of crypto exchange Coinbase, to discuss potential personnel appointments. Today on Equity, we're bringing you an interview between Rebecca Bellan and co-founder and CSO of blockchain analysis firm Chainalysis, Jonathan Levin. The pair caught up at our Strictly VC event in New York shortly before the Gary Gensler news dropped to discuss: The imminent change for crypto in the wake of the US election Trends in crypto crime Chainalysis’s choice to run its operations in the US How to build trust in crypto Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:11Rebecca Bellan?

  Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Rebecca Bellan and this is our Wednesday episode where we home in on a trend in the tech world and dive deep. Late last week, US Securities and Exchange Commission Chair Gary Gensler said that he was "proud to serve the agency," which sounds like a hint at an upcoming resignation. Gensler has faced heavy criticism for his crackdown on crypto, including a recent lawsuit from 18 states, and he's likely to be replaced under President-elect Donald Trump, who has vowed to oust Gensler. On Tuesday, The Wall Street Journal reported that Trump is meeting with Brian Armstrong, the CEO of crypto exchange Coinbase, to discuss potential personnel appointments. Now, this is all news to keep in mind during the conversation we're bringing you today, which is my interview with Jonathan Levin, the

• 0:56Rebecca Bellan?

  co-founder and CSO of blockchain analysis firm Chainalysis. Jonathan and I caught up at our Strictly VC event in New York shortly before the Gary Gensler news dropped to discuss the imminent change for crypto in the wake of the US election, trends in crypto crime, Chainalysis's choice to run its operations in the US, and how to build trust in crypto. Let's take a listen.

• 1:18Rebecca Bellan?

  Thanks for joining.

• 1:19Speaker 01

  Thanks for having me.

• 1:20Rebecca Bellan?

  So Connie briefly intro'd your company, but I would love to just get from you, top line, what's Chainalysis, right? Chainalysis. I always want to say chain analysis.

• 1:29Speaker 01

  So do our employees, like, so does our customers. Yeah. Lots of people get it wrong. The founding story of Chainalysis was that it was founded by people who have English as a second language. So, you know, but what we do at Chainalysis is we provide investigation software and compliance solutions to government agencies that are looking to solve cryptocurrency-related cases. Also, we provide compliance solutions to all the financial services firms, fintechs, entrepreneurs who are building in the space, who need to comply with their money laundering obligations and make sure the risky people aren't using their platforms.

• 2:07Rebecca Bellan?

  Yeah, I can imagine that it's a

• 2:10Speaker 02

  About to get a lot busier for you. So I mean, obviously, I want to talk about the work that you've done. But first, I'd love to just, you know, address one of the probably elephants in the room that Bitcoin just crested $90,000 in the wake of Donald Trump's win last week. Are you expecting there to be continued euphoria or maybe a pullback when you get this kind of a push?

• 2:31Speaker 01

  Yeah, I think that one of the things that people should look at when they're thinking about the implications of, you know, the election for cryptocurrency is that actually cryptocurrency became a pretty big bipartisan issue during the election cycle. And so if you look at sort of the platforms that were put forward, Kamala and Trump had digital assets on the agenda, pushing forward that there needed to be a strong movement in the United States for the industry and that we're not doing enough when it comes to stable coins and having rules on the books for people who are actually building in cryptocurrency markets. You know, that being said, Trump has obviously started off and has been critical of Gary Gensler

• 3:15Speaker 01

  and other people who have held back the industry in the United States. And so there is a lot of optimism at the moment of actually specific rules that are going to be repealed that allow for new people to build businesses and change of people at the top of the regulatory organizations so that there'll be less regulation by enforcement and more clear rules for people to build businesses with.

• 3:41Speaker 02

  Yeah, there's a lot of hype and I think a lot of that is tied up in this kind of expectation that they're, well, as you said, repealing of rules, so kind of less regulation all around. Or I don't know, is it that it's going to be less regulation or are we going to see different kinds of regulation, right? Like seeing crypto be classed as a commodity rather than a security or?

• 4:00Speaker 01

  Yeah, I think it's, there's a little bit of a combination. There are some rules on the books. There's some very technical accounting rules in particular that have held back some bigger banks from directly custody in crypto and there's a big expectation that that will be rewound and so that the household names that you know about that you keep. Your investment portfolio out like the HSBCs of the world that were in the building. They will be able to actually custody crypto according to federal regulations. And so those types of rules are things that people are actually looking for some change. I would say that, again, going back to the bipartisan point, all of the bills about market structure and stable coins that people are also anticipating being pushed forward.

• 4:44Speaker 01

  Those are bipartisan bills that have been on the agenda. And now people think that with this change, there will be some major progress on that.

• 4:52Speaker 02

  Hmm. And you say it's a bipartisan movement. I think Trump's just more of a hype man about it than Kamala was. But crypto platforms did pour hundreds of millions of dollars into lobbying, mainly Republican candidates, from what I'm seeing on Open Secrets. Some of the main ones were Coinbase, Ripple Jump. Did Chainalysis donate to any lobbying firms to try to push any legislation or in selection?

• 5:16Speaker 01

  Yeah, so no, we we don't spend on political donations and elections. We actually serve the federal government, if you think about it. So the federal government is a large customer of Chainalysis, both in law enforcement, regulatory agencies. So we have worked with different administrations over the years. And so we have to make sure that we are part of the technology infrastructure that the government runs on, rather than playing in the game of politics.

• 5:44Speaker 02

  Yeah, well, not to play the game of politics, just a little bit more. But you mentioned that, you know, Trump has been critical of Gary Gensler, head of the SEC, who has come down really hard on crypto, really kind of trying to force it into that securities box. And there's been talk of certain crypto insiders taking over his role, being head of the SEC. What do you think of someone that's kind of in the crypto industry, kind of leading securities for the country?

• 6:09Speaker 01

  I mean, there hasn't been any announcement on the SEC, at least as far as I've been checking the news as I was coming up here. I think that when it comes to thinking about some of the proposals that are concrete, that will actually get through, there are some proposals from, for example, Hester Pierce, about safe harbor for cryptocurrencies that has support, both in the industry and also through commissioners of the SEC. So I think what people should look at is not necessarily just the personalities that are involved, but also, you know, what are the concrete rules that are going to be there to safeguard investors and help innovation in the sector?

• 6:49Speaker 02

  Right, well, I guess like commodities, it makes it just a little bit more difficult to safeguard investors because there's, you know, less transparency, there's less reporting. So I guess that's something that they're gonna have to to work out.

• 7:02Speaker 01

  Yeah, I think that the commodities futures exchange, the commodities future, the CFTC basically has been doing work inside the cryptocurrency industry as well. I mean, there are now derivatives products that are set on top of cryptocurrencies and the CFTC has oversight over that and market manipulation in the spot market. But there is actually more that the CFTC could do to safeguard investors further from market manipulation and other things that actually has been held back due to the ambiguity of who has jurisdiction. So I think that the first thing to get right is there needs to be clear delineation on jurisdiction. That then actually you can build those programs, whether that is in CFTC or whether that is in SEC.

• 7:47Speaker 02

  Right, and that's something that the crypto industry, blockchain industry has been crying out for, just like, give us clear rules. You know, we're not really a security or we don't think we are, or some cases it is, in some cases it's not, I think. But there's the people who are, I guess, more anti crypto or don't understand it. There's a lot of fear that there will be more fraud, more scams, more meme coins. If there are fewer compliance requirements in the future, will that actually help or hurt your business?

• 8:13Speaker 01

  Yeah, I think that when you think about this issue and you think about the rules of how investors are going to be protected, how consumers are being protected. I don't think that there's a rollback of, you know, money laundering statutes. There's not going to be a rollback of consumer protection for certain types of investment. In fact, I actually think that, again, a lot of these issues are bipartisan, that, you know, fraud is on the rise, romance scams, pig butchering. There are a lot of different threats. Pig butchering is-

• 8:46Speaker 02

  Pig butchering?

• 8:47Speaker 01

  Pig butchering is a type of scam where a scammer will actually get a victim to start to believe that they are in love with someone. And then, you know, they fatten up their victim before actually taking their entire life savings.

• 9:02Speaker 02

  Oh, is that all? Okay.

• 9:03Speaker 01

  Yeah, sorry. It's a it's a very unfortunate event when it does happen. And so it's actually meant to be a shocking term that turns people's heads. And so there are all these types of threats that exist within the cryptocurrency market. I don't believe that there's going to be a repeal of any of the things that protect consumers or protect national security. And so for our business, that's what matters. And we're here to help with that.

• 9:29Speaker 02

  Well, while we're on the subject of pig butchering, I'd love to hear any other crazy, I don't know, what are some of the trends that are up aside from that? What are some crypto crime trends that you are seeing a lot of these days?

• 9:41Speaker 01

  I think one of the things that has happened over the sort of evolution of chain analysis is that we've moved from a world of crypto crime, if you will, to a world where cryptocurrency is in all types of crime. And so what we see is cryptocurrency showing up in counterintelligence cases, cases where nation states are paying individuals to spy and and plot terrorist attacks. So you see cryptocurrencies used in ransomware, or you see it used in weapons trade. And, you know, all of those different aspects and narcotics and child abuse material distribution, really cryptocurrency has been used in every type of crime that you can think

• 10:21Speaker 01

  of. And so our customers in our public sector business now see cryptocurrency as an opportunity for them to tackle not just cybercrime, but all types of crime and embed that within their full enterprise. And so that's what we we've been focused on.

• 10:37Speaker 02

  Everything on the blockchain can be traced, right? But only if you kind of know how to read the, you know, many numbers associated with each block on the chain. And so how were you able to kind of bridge that gap and find the end user?

• 10:51Speaker 01

  Yeah, what chain analysis does in a nutshell is that Every blockchain transaction is public. Anyone can go look at any transaction that's ever happened on any blockchain. What the blockchain won't tell you is which entity actually put those transactions in the blockchain. Was this transaction put there by the US government? Was it put there by North Korea? Was it put there by Coinbase? What Chainalysis does is it provides the map from the real world entities that are putting transactions in the blockchain to the transactions themselves. So that map is our research, our data that we collect that then we serve back to our customers.

• 11:32Speaker 02

  And you've done some really high profile cases in this as well. You know, obviously the crypto world reputation took a hit with FTX, but you've had a hand in helping law enforcement track the myriad of fraud.

• 11:43Speaker 01

  Yeah, and we we get involved as a business. Our technology powers thousands of investigations pretty much every day. And so I don't even know all of the different cases that we have helped solve. But in the in the case of FTX, we were called in to essentially be able to follow the money on exactly where all the assets were sitting. And people can read the public filings on the case, the criminal case. And you can see that assets were spread everywhere. And being able to identify those counterparties and move really quickly enabled the administrators to actually be able to recover those funds and return those funds to victims of the crime.

• 12:23Speaker 02

  Are you finding that people who use crypto in crime, they're finding better ways to kind of cover their tracks using, I don't know, mixers, mixing software?

• 12:32Speaker 01

  Yeah, we definitely see a game of cat and mouse developing on obfuscation techniques like mixers, like privacy coins, et cetera. We think of that at Chainalysis as a place where we need to do research and we need to build technology to help law enforcement track those things. We've continued to be really successful at cracking investigations with our government partners on any type of crime that's happened. And so 10 years in, there hasn't been really a significant case where law enforcement was not able. To get beyond those techniques. And the interesting thing is that the blockchain preserves evidence forever. And so even if you can't solve that today, maybe you can solve it in five years from now with new technology.

• 13:17Speaker 02

  So obviously, one of your major tailwinds is the election and another would probably be AI. Are you using AI in this way to to kind of find new patterns? So that it's easier to see if anyone's trying to obfuscate their path?

• 13:32Speaker 01

  Yeah, I think that, and this is maybe a great point for any business that is building at the moment, particularly in in the software market, is that you have to be thinking about AI to improve your development processes, your internal processes. We are experimenting with AI on productivity. But also, I think that the winners of the AI technology trend are the companies that actually have proprietary data that AI can then exploit and make easier for users to gain access to those insights. So everyone who has built sort of the best training data sets on self-driving cars

• 14:14Speaker 01

  or the best training data sets on how the blockchain is mapped to real-world entities. We now get a huge tailwind in the technology that we can actually serve our users with models that are well-trained on the best training data set. We are definitely thinking about that at Chainalysis. We have a very high bar for when we would expose that to our customers. Because at the end of the day, if you're a law enforcement agent, you need to be able to stand up in court and stand behind it. And, you know, we're not quite there for AI evidence to be entered into court, but it will come.

• 14:48Speaker 02

  Well, you certainly have a lot of data to work with. I mean, you've been going since, what, 2015? This is, to take it back a little bit, I think, was it 2015 or 2016 that Chainalysis did Techstars?

• 14:59Speaker 01

  Yeah, I think it was 2016. It's been a bit of a blur over the different years. But yeah, we started in 2014. I think we went through Techstars in 2016.

• 15:06Speaker 02

  Okay, and then you said that you were European, all the founding teams European. We're here in New York. I think you're based in New York.

• 15:12Speaker 01

  Yeah.

• 15:13Speaker 02

  Why choose the US for your operations?

• 15:17Speaker 01

  Yeah, we came to the US very early on. I mean, we started the business in Europe. And very quickly realized, you know, when you're crossing the Atlantic four times a month, going backwards and forwards to meetings in both New York and DC, you choose that maybe London is not the best place to go, or maybe Copenhagen wasn't the dream city that you wanted to live in. So we quickly decided that New York was going to be our tech hub and the place to build our global headquarters. We're based in Square and really the goal from that is to access deep talent market on the tech side. But then also, you know, your short ride from Penn Station and I go up and down to DC a lot for our government business.

• 15:57Speaker 01

  You know, Chainalysis is a larger company, you know, we're over 700 employees around the world and we have a big office in DC. We actually now run that as a subsidiary of Chainalysis with, you know, it's a US company with, that serves our federal government clients. And so that's a little bit separate from our day to day operations. So I never need to move down to DC because New York is a much better city to live in.

• 16:21Speaker 02

  Oh yeah, I agree wholeheartedly. Do you have any advice for founders who are trying to build trust in crypto, particularly with traditional finance?

• 16:30Speaker 01

  Yeah, I would say that building trust in crypto has been a major focus of Chainalysis. I think that explaining to businesses in the financial services space, what is first and foremost the business opportunity? People do not care about the technology that moves bytes around a machine. People care about the outcomes that you are generating for their business and for their bottom line. The good part is that there are now multiple stories of huge successes in traditional finance for cryptocurrency. You have ETF products that have been launched. They are the most successful ETF launches of, you know, the last decade.

• 17:12Speaker 01

  You have stablecoins actually being used as the majority of payments that are happening on cryptocurrency networks. You have huge opportunities for cross-border and other types of applications that actually will impact those businesses. Start there and, you know, when it gets down to the risks around money laundering, give Chainalysis a call.

• 17:33Speaker 02

  Okay, any predictions for the industry moving forward? We've talked a little bit about some of your AI predictions. I'd like to hear and then just, yeah, anything you'd like to share.

• 17:42Speaker 01

  Yeah, I'm very optimistic about stablecoins being used for more payments. I think you'll see, people may have seen the bridge was bought by Stripe for a billion dollars. They're a stablecoin infrastructure company. You'll see some very big names and logos of huge enterprises that are now starting to move money internally cross-border for operational purposes. You're going to see governments also move money cross-border for payments of infrastructure and other types of deals. That is going to be a big trend for 2025.

• 18:16Speaker 02

  Yeah.

• 18:16Speaker 01

  Yeah, I was like, what year? What year are we in? And then I would say that maybe a bolder prediction is that, you know, AI is obviously topic of the day. I've come across a lot of companies that are now building infrastructure to allow AI agents to actually have native wallets. When I first got into crypto, there was a lot of talk of machine-to-machine payments, like your fridge paying the grocery store for milk that would get delivered, you know, like stuff like that. I don't think that that's the machine-to-machine payment world. The real machine-to-machine payment application is going to be AI agents that are able to pay other agents to complete various pieces of work for you. And that is a new trend that we're starting to see inside the industry.

• 19:00Speaker 01

  And I think if you look into 2025 and 2026, you'll see a lot of, a lot more of that that is native to the technology, which is really exciting.

• 19:09Speaker 02

  Awesome. Well, thank you so much for coming on to join us today and thank you all.

• 19:14Speaker 01

  Thanks very much.

• 19:17Speaker 03

  Equity is produced by Teresa Loconsolo with editing by Cal. Bryce Durbin is our illustrator and we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening and we'll talk to you next time.