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All blockchain cryptocurrency exchanges are transparent. However, wallet holders can hide behind a pseudonym associated with this transparency. But this ability to hide one’s identity has always had a bad reputation in traditional finance. What they really want is strict KYC (Know Your Customer) compliance. Will cryptocurrencies be able to integrate this standard without losing their soul? Can other identity verification mechanisms be envisaged?
Cryptocurrencies before the KYC procedure
By definition in the universe cryptoeverything changes on Blockchain based on the pseudonym principle. Anyone can track transactions. But it is impossible to know who owns the wallets. We can only know the address of a wallet like Ledge, or an alias when using the Ethereum naming service.
But supervisors increasingly reject this situation. Therefore, they require crypto exchanges to strictly adhere to KYC. Binance, which until a few months ago was one of the bad students, has tightened controls since the end of 2021. However, many small exchanges still do not follow this rule. Therefore, they allow their users to bypass international financial regulations. But this opacity doesn’t just make people happy. Various scandals erupted in the cryptocurrency market are pushing investors towards teams that are more compliant with identity verification rules.
Towards a decentralized verification process?
However, one shouldn’t think that the KYC standard is so idyllic and so easy to follow. Charles Hoskinson, the founder of Cardano, said that KYC guarantees are still insufficient and that money laundering is not discouraged. processes. Therefore, we must ask ourselves if the cryptocurrency community is unable to create it. processes more decentralized and secure KYC system. Blockchain technology allows you to store data and make it inviolable, guaranteeing its confidentiality.
Some projects, such as Lientry on Polkadot (DOT), offer the protection of personal data entrusted by users. Therefore, you can take on the role of a trusted third party. They therefore guarantee the identity of the users to the protocols and institutions that request it. These projects, decentralized and modifiable at will to adapt to any changes in standards, can reassure regulators. And they can also show the contribution of blockchain technology.
Often criticized by regulators for their lack of transparency, active crypto projects increasingly demand compliance with KYC standards. However, there is hope that the emergence of decentralized identity projects will bring these two worlds closer together.
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