Novel Approach to KYC Developed by IOTA Foundation and Partners
As cryptocurrencies gain mainstream acceptance, regulators worldwide are working to establish regulations to prevent illicit activities while promoting innovation. In response to upcoming Know Your Customer (KYC) rules in Europe, the IOTA Foundation has collaborated with partners to create a unique KYC system that prioritizes privacy. This system utilizes tokenization to validate identities on-chain while keeping personal information off-chain and under user control.
How the System Works
The first step involves IDnow, a leading identity verification platform, confirming users’ identities through automated or human-assisted checks compliant with anti-money laundering standards. Walt.id then tokenizes this verification process without recording personal data on-chain. The resulting token is stored in the user’s Bloom wallet, allowing authenticated interactions across Web3 apps.
If necessary, authorized parties such as law enforcement can access the identity details while still respecting user autonomy. The token can also be revoked for added flexibility. Additionally, credentials can be shared in an interoperable format for offline verification.
Built for Web3 KYC at Scale
The rise of Web3 presents new challenges and opportunities for digital identity frameworks. IOTA’s system addresses these challenges by incorporating decentralization, governance, and consent. By establishing an interoperable global standard, compliance burdens are eased for platforms and portability is enhanced for users. The modular nature of the system allows for scalability as needed.
User Control Remains Paramount
IOTA’s system upholds the principle of self-sovereign identity, where users have ownership and control over their data. Personal information is encrypted, and individuals have fine-grained permissions to decide what information to share with whom. This approach minimizes data collection and allows users to revoke access if desired.
Plan for Regulatory Evolution
As regulators focus on decentralized finance (DeFi) and non-fungible token (NFT) platforms, KYC requirements are expected to become stricter. Having an adaptive solution in place enables operators to stay ahead of these regulations and concentrate on development. The modular stacks can be easily updated to comply with evolving laws in different regions.
The IOTA Foundation, responsible for the Shimmer network and core infrastructure for the open metaverse, is invested in navigating this changing landscape. The foundation’s decentralized distributed ledger technology facilitates trusted machine-to-machine transactions and manages the IOTA Identity framework. By integrating portable KYC checks and credentials, powered by IOTA and industry leaders, next-generation applications can be developed across various domains.
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