How Compliance Teams Are Using Blockchain Analytics to Stay Ahead of Regulators

The EU’s Markets in Crypto-Assets regulation went live in December 2024. The U.S. GENIUS Act is moving through Congress. Hong Kong, Singapore, and Dubai have all tightened their digital asset frameworks in the past 18 months.

For compliance teams at financial institutions, the message is clear: on-chain monitoring is no longer optional. It’s becoming mandatory infrastructure.

The shift isn’t just about new rules. It’s about how compliance teams are rebuilding their surveillance workflows around blockchain data, treating on-chain analytics as essential as traditional AML systems.

The regulatory landscape

MiCA requires crypto asset service providers to implement transaction monitoring, counterparty due diligence, and the ability to trace asset origins. The GENIUS Act proposes similar requirements for U.S. stablecoin issuers and exchanges. Existing FinCEN guidance already expects covered institutions to monitor for suspicious blockchain activity.

The common thread: regulators expect institutions to know where crypto assets come from, where they’re going, and whether any touchpoints involve sanctioned entities, mixers, or other high-risk services.

Meeting these requirements with manual processes is impractical. The volume of transactions, the pseudonymous nature of addresses, and the 24/7 operation of crypto markets all demand automated, continuous surveillance.

Building the compliance console

Modern compliance teams are constructing what amounts to a blockchain surveillance stack, often anchored by intelligence platforms that provide entity labeling, transaction monitoring, and alerting capabilities.

Arkham Intel functions as this kind of compliance console. The platform maintains a database of labeled wallets, flagging addresses associated with sanctioned entities, known mixers, darknet markets, and other high-risk services. Compliance teams configure alerts to trigger when client wallets interact with flagged addresses, enabling real-time detection rather than retrospective investigation.

The entity labeling is particularly valuable. Rather than analyzing raw addresses, compliance officers can see that a transaction involves “Tornado Cash” or “OFAC-sanctioned entity” or “exchange hot wallet,” contextualizing risk immediately. This kind of entity-level labeling is exactly what regulators expect when MiCA and the GENIUS Act talk about tracing asset origins and identifying counterparties.

Four core workflows

Compliance teams are using blockchain analytics across four primary workflows.

Onboarding and KYC. Before accepting a new client or counterparty, compliance teams examine their wallet history. Has the address received funds from sanctioned sources? Is there mixer usage in the transaction graph? What’s the overall risk profile based on historical activity? This pre-relationship screening catches problems before they become the institution’s problems.

Ongoing monitoring. Once a relationship exists, continuous surveillance tracks client wallet activity. If a previously clean client suddenly receives funds from a flagged address, an alert fires. If transaction patterns suggest structuring or layering, the system flags it for review. This ongoing monitoring satisfies regulatory expectations for continuous compliance, not just point-in-time checks.

Investigations. When suspicious activity is detected, compliance teams need to build cases. Blockchain intelligence platforms provide the tools: transaction graphs showing fund flows, entity labels identifying counterparties, and exportable reports suitable for filing SARs or responding to regulatory inquiries.

Regulatory reporting. Increasingly, regulators expect institutions to demonstrate their monitoring capabilities, not just their outcomes. Having a documented blockchain surveillance program, with clear policies, configured alerts, and audit trails, becomes part of examination readiness.

Arkham in the institutional stack

For many institutions, blockchain analytics sits alongside traditional AML and trade surveillance systems. The compliance team might use a legacy transaction monitoring platform for fiat activity, a separate system for trade surveillance, and a blockchain intelligence platform like Arkham Intel for on-chain monitoring.

The integration challenge is real. Compliance teams want unified dashboards, consolidated alerting, and streamlined case management. The platforms that succeed in this space will be those that play well with existing infrastructure while providing capabilities that traditional systems lack.

Arkham research provides additional support for compliance programs, documenting methodologies, publishing case studies on major investigations, and maintaining reference datasets on sanctioned entities and high-risk services.

The venue selection question

Compliance considerations increasingly influence where institutions choose to trade.

Some institutions prefer venues that are instrumented with deep on-chain intelligence, because it makes surveillance and reporting easier. If the exchange itself maintains robust entity labeling and can provide detailed transaction provenance, the compliance burden on the trading firm decreases.

Arkham Exchange, a transparency-first crypto trading platform for spot and perpetual futures integrated with Arkham’s on-chain intelligence tools, reflects this alignment. The same infrastructure that powers Arkham Intel’s compliance capabilities is embedded in the trading platform, creating a venue designed with surveillance in mind.

This doesn’t make compliance automatic, but it does make it easier. When the trading venue and the monitoring tools share the same data layer, gaps between execution and surveillance narrow.

Staying ahead, not catching up

The institutions building blockchain surveillance capabilities now are positioning themselves ahead of regulatory requirements, not scrambling to catch up after enforcement actions.

The pattern is familiar from previous waves of financial regulation. The firms that invested early in AML infrastructure during the post-9/11 buildout gained structural advantages over laggards. Early adopters also tend to have fewer enforcement actions and stronger relationships with supervisors, turning compliance investment into regulatory goodwill. The same dynamic is playing out in crypto compliance.

The tools exist. The regulatory direction is clear. The question for compliance teams is whether they’re building the infrastructure now or waiting until it’s mandatory, and more expensive.