KYC in Crypto Terms
What Does “Know Your Customer” Have To Do With Crypto? That Depends If You’re Doing Your Research
“Know your customer”, or “KYC”, is the process of a business verifying the identity of its clients. At its core, KYC is about building trust between a business and its customers. The term is also used to refer to bank regulations that require financial institutions to verify the identity of their clients. In the cryptocurrency world, KYC is generally used in reference to exchanges and ICOs. Exchanges will usually require some form of KYC before allowing a user to deposit or withdraw funds. This is to prevent money laundering and other illegal activities.
Uses Of KYC
ICOs will also often have a KYC process in place, in order to comply with regulations and avoid legal issues. Investors in an ICO will generally need to provide some form of identification, such as a passport or driver’s license. The process can be a hassle for users, but it is generally seen as a necessary evil to prevent fraud and other illegal activities. KYC Blockchain systems enable transparency and immutability that, in turn, allows financial institutions to validate the trustworthiness of data present in the DLT platform. The data collected during the process is stored on a decentralized network, which makes it available to all members of the network. This allows for quick and easy verification of identity, without the need for a centralized database.
The public perception of KYC Blockchain systems is that they are more secure than traditional systems, as the data is distributed across a network and therefore less susceptible to hacking. However, there have been some concerns raised about the privacy of KYC data on a Blockchain. As the data is stored on a public ledger, anyone with access to the network can view the data. This could potentially lead to identity theft or other fraud.
Within crypto circles, there are already some “Know Your Customer” startups that have been gaining traction in recent years. These startups are working on developing solutions that will address the concerns about privacy and security, such as: Civic, Bloom, and Sovrin.
First, Civic is a decentralized identity platform that allows users to securely and conveniently verify their identities. The platform makes use of the Ethereum blockchain and smart contracts to provide a secure and convenient way for users to control their personal information.
Second, Bloom is a decentralized credit scoring platform that uses the Ethereum blockchain to help lenders assess risk and make credit decisions. The platform allows users to control their own data and share it with lenders on a permission basis.
Lastly, Sovrin is a decentralized identity platform that allows users to securely and conveniently verify their identities. This allows them to complete the KYC process in a fairly efficient manner. The platform uses the Sovrin Network. Importantly, the network is built on the Hyperledger Indy, a distributed ledger. Specifically, this provides a secure and convenient way for users to control their personal information.
KYC In The Future
The world of cryptocurrency and blockchain technology continues to evolve. Inherently, we will likely see more startups emerge that are working on KYC solutions. The process is an important part of ensuring the legitimacy of transactions in the cryptocurrency world, and it is essential for preventing fraud and money laundering. These startups are working on making the KYC process more convenient and secure for both businesses and consumers.
So far, KYC Blockchain systems have mostly been used by financial institutions and exchanges. However, platforms are being developed with potential for these systems to be used by a variety of businesses, such as e-commerce platforms, social media networks, and healthcare providers. One such platform is KYC-Chain, which is being developed by the British Standards Institution. KYC-Chain aims to create a global standard for KYC data, which would make it easier for businesses to comply with regulations. Another project working on a KYC Blockchain platform is Jumio, which offers a service using biometric data to verify identity. Jumio’s service is already being used by several major businesses, including Airbnb, Binance, and Coinbase.
The use of KYC Blockchain systems is still in its early stages, but it has the potential to streamline the process for both businesses and consumers. These platforms could make it easier for businesses to comply with regulations, while also giving consumers more control over their personal data. In the future, we may see more businesses adopting KYC Blockchain systems, as they become more widely available.