Tether will now be able to identify “high risk” transactions on its network thanks to a new partnership with blockchain forensics firm Chainalysis, the companies announced in a press release on 12 February.

According to the announcement, Tether will make use of Chainalysis’ Know-Your-Transaction (KYT) tool, which will allow it to monitor the activity of its stablecoin on the network. The compliance solution will provide the token issuer with a “real-time anti-money laundering” tool, which can track the entire chain of a token’s life, from issuance to redemption.

Tether’s Chief Technology Officer, Paolo Ardoino, said in a statement:

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“This solution allows us to ensure a secure compliance program that fosters trust with regulators, law enforcement agencies and users. This is achieved without sharing our user’s identifying information, as such data is only kept on our servers.”

The tool provides both an API and a user interface, through which token issuers can monitor the activity, and “quickly understand the risk profile of each token holder”. And even though Tether can not confiscate the tokens used in a “high risk” transaction, it can still freeze the wallets that contain them.

Tether’s dollar-pegged stablecoin, USDT, is already live on blockchains such as Omni, Ethereum, EOS, Liquid and Tron. Earlier this week, the stablecoin was also deployed on the Algorand’s permisionless pure proof-of-stake blockchain.

The Know-Your-Transaction tool is only one of the products that Chainalysis offers. Last month, the Japan-based cryptocurrency exchange BITPoint announced that it will make use of Chainalysis Reactor, Chainalysis’ investigation software, which can “identify and trace funds and provide comprehensive investigation support across multiple cryptocurrencies”.

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