Will KYC Kill Cryptocurrencies?

All blockchain cryptocurrency exchanges are transparent. Despite this, the holders of wallet it can hide behind the pseudonym linked to this transparency. But this possibility of hiding one’s identity has always had a bad press in traditional finance. This in fact requires a rigorous application of the KYC (Know your customer). Will cryptocurrencies be able to integrate this standard without losing their soul? Can other identity verification mechanisms be considered?

Crypto currencies that face KYC procedures

By definition, in the universe cryptoall the trade on blockchain are based on the pseudonym principle. Anyone can track transactions. But it is impossible to know who it belongs to wallets. We can only know the address of a wallet howedger, or the pseudonym during use Ethereum name service.

However, regulators increasingly reject this state of affairs. They therefore impose strict compliance with KYC on cryptocurrency exchanges. Binance, which a few months ago was one of the bad students, has thus tightened its controls since the end of 2021. However, many small exchanges still do not respect this rule. Therefore, they allow their users to circumvent international financial rules. However, this opacity doesn’t just make people happy. The various scandals that have erupted in the cryptocurrency market are pushing investors towards teams that are more respectful of the rules of identity verification.

Towards a decentralized verification process?

However, it shouldn’t be believed that the KYC standard is so idyllic and so simple to adhere to. Charles Hoskinson, the founder of Cardano, said that the KYC protections were not sufficient anyway and that money laundering was not curbed by this. processes. So we have to ask ourselves if the cryptocurrency community is unable to create a processes More decentralized and secure KYC. Blockchain technology allows data to be saved and made inviolable, guaranteeing its confidentiality.

Some projects such as Lientry on Polkadot (DOT) offer the protection of personal data entrusted by users. They can thus play the role of a trusted third party. They therefore guarantee the identity of the users to the protocols and institutions that request it. Decentralized and modifiable at will to accommodate any change in standards, these projects could placate regulators. And they could also show the contribution of blockchain technology.

Often criticized by regulators for their lack of transparency, active crypto projects must increasingly comply with KYC standards. However, it is to be hoped that the emergence of decentralized identity projects will bring these two worlds closer together.

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Founded by Marc-Antoine CAEN POLETTI in 2021, Alt Write SEO is a content writing agency specializing in cryptocurrencies, blockchain and NFT. It finds its roots in 2016 with the French cryptocurrency club, of which Marc-Antoine is the current president. Our mission is to support French-speaking crypto companies to make France the first crypto nation in the world.

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