Chainalysis, the blockchain data platform, today announced it will support the Lightning Network, a second layer protocol built on top of the bitcoin blockchain designed to enable fast, low-cost transactions. VASPs, including cryptocurrency exchanges, that use Chainalysis KYT (Know Your Transaction) for real-time transaction monitoring will now be able to compliantly allow deposits and withdrawals of Bitcoin from a Lightning node.

The Lightning Network is a decentralized system for instant, high-volume micropayments that does not require the delegation of custody of funds to third parties. Lightning enables users to more efficiently use Bitcoin – the world’s most widely used and valuable virtual asset – for smaller payments such as tips and remittances instantaneously and scalably. Although the Lightning Network launched in 2018, governments and corporations – including El Salvador and Twitter – have recently adopted Lightning solutions for payments, driving adoption to record highs. According to Chainalysis data, just under 3,600 BTC worth over $205 million is locked in public Lightning Network channels as of December 1, 2021, up from 468 BTC worth roughly $4.8 million on January 1, 2021.

“Chainalysis exists to build trust in cryptocurrency in order to promote more financial freedom with less risk,” said Pratima Arora, Chief Product Officer, Chainalysis. “The Lightning Network solves many of the challenges that prevent the Bitcoin protocol from being used for micropayments and other transaction types that bolster financial inclusion. By enabling our customers to compliantly support Lightning transactions, we hope to grow the network’s popularity and help it scale.”

For the first time, VASPs can now offer support for Lightning transactions aligned with global regulatory best practices. Chainalysis KYT will support pre-screening for Lightning withdrawals and behavioral alerts.

“As the provider of the world’s most popular blockchain-based gaming and betting platforms, much of our business depends on our ability to scale our users’ cryptocurrency payments,” said Reio Piller, Co-founder and CTO of Yolo Group. “Chainalysis support of the Lightning Network gives us the compliance tools we need to safely leverage Lightning to grow our business and provide a better payments user experience for our customers.”

Support for the Lightning Network will become available in February for Chainalysis KYT customers.

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