Peer-to-peer exchange Paxful will add security to its operation through a partnership with blockchain analysis outfit Chainalysis.

Through a new partnership, Paxful will harness specific technologies from Chainalysis. “Paxful uses the Chainalysis Reactor to conduct deep investigations and the Chainalysis KYT to monitor transactions for any illicit behavior,” Youssef said, referring to the firm’s Know Your Transaction solution — a similar acronym to Know Your Customer, or KYC, regulations. Youssef added:

“Through working with Paxful, Chainalysis is evolving its policy and will evaluate P2P exchanges on a case-by-case basis before labeling them as risky, just as it does for other cryptocurrency exchanges.”

Prior to working with Paxful, Chainalysis viewed P2P organizations as having questionable safety, due to their lack of required user data, a press statement said.

“Paxful is setting a new standard for compliance at P2P exchanges,” Paxful CEO Ray Youssef told Cointelegraph. “Chainalysis is changing its policy based on the strides P2P exchanges like Paxful have made.”

Don’t users go to P2P exchanges seeking anonymity?

At its core, crypto’s pioneer asset Bitcoin came into the world as an anonymous digital asset. Over the past 11 or so years since the industry’s beginning, a movement has pushed forward, touting the importance of data privacy.

Historically, many crypto users have gravitated toward P2P outfits, such as LocalBitcoins, as a way of trading value while controlling their own privacy and data. Such a partnership between Paxful and Chainalysis could thus seem antithetical to the crypto industry’s founding ethos of privacy and anonymity.

“The Paxful marketplace is for the honest users,” Youssef said in response to questions on the matter, adding:

“Like in other industries, there are bad actors who try to scam and steal money anonymously from the honest users. They are the ones who fail to provide appropriate verification and are left with only one option: to flee. KYC and KYT keep the honest users in the platform, and give them more confidence to trade.”

Anonymity and privacy are part of a double-edged sword. Authorities express the desire to protect users from fraudulent players, while some honest traders also prefer to guard their personal data. The topic remains up for debate.