Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Solving the KYC/AML problem using Blockchain Technology
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Know Your Customer (aka KYC) is the regulatory and compliance obligation for the conventional banking and financial system to capture customer information before onboarding and providing any financial services. In banks, KYC is embedded into the account opening forms, which mandate customers to provide accurate information and ideally update as soon as any change occurs in the KYC data.
Similarly, other financial institutions, such as Stocks, Mutual Funds, Insurance companies, etc., also require KYC information from their prospective customers. Primarily KYC helps financial institutions prevent identity thefts, money laundering, terrorist financing, and profiling and eliminating runaway creditors.
In today’s global economy, we live where users control their identity entirely and are the sole authorizer with whom they may share their information. As a result, know-Your-Customer has become pivotal in the digital world. As a result, large financial institutions must identify ways to trust foreign banks and have more transparency in recipients’ profiles.
The Flaws in the System
Irrespective of the use case’s severity, establishing identity through Know Your Customer or KYC verification is prolonged. In addition to the extensive paperwork associated with undertaking such procedures, a lack of transparency regarding the use of personal data collected from customers has led to inefficiencies in collating data between parallel systems.
Conventional Banking and Financial institutions spend a substantial part of customer acquisition costs on operating resident and remote KYC databases and keeping them updated and accurate. KYC’s overall cost increases due to a lack of transparency, poor control, mistrust, and data duplication. Not to forget that KYC-related compliance has to be done every time a person enters into a relationship with another institution. In addition, institutions have little to no interoperability to share KYC-related data.
Solving Compliance through the Blockchain
Blockchain technology allows for the creation of a distributed ledger that is then shared with all users on the network. This means that blockchain databases have an immutability that makes the data they contain far more trustworthy. If the financial services sector, for example, implements blockchain for KYC verification, they will verify users quickly and reliably via an app, etc. Due to the reliability of blockchain databases, government institutions and companies could entirely rely on the data, removing the need for further ID checks.
We can develop a unique self-sovereign decentralized Know-Your-Customer (DKYC) model with a blockchain-based infrastructure. This model can help enhance customer privacy through consent-based access featuring regulator governance. It can also help banks to use trusted and accurate customer data while reducing customer acquisition costs.
The open areas for research are: to address challenges such as fraud protection using artificial intelligence, creating the devices’ identity, dApps application models, on-chain/off-chain oracles, performance throughput, and the blueprint for decentralizing score-based KYC.
Everything from the immutability of blockchain databases to their ability to improve customer identification transparency will massively help improve the process and reduce fraud.
Government bodies will also benefit as risk officers have better access to data, so the relationship between the financial and regulators will be more transparent. This dramatically reduces financial fraud and crimes in the long term.
KYC Blockchain Project – KYC-Chain
With a bit of research, it can be found that most countries follow a similar KYC/AML framework, all taking their roots from either the European or the American standard of compliance. Currently, most organizations have an inefficient system of asking for KYC/AML documents separately each time a new customer comes in.
KYC-Chain
The KYC-Chain project is an “all-in-one workflow solution to verify your customers’ identities, streamline a KYC onboarding process, and manage the entire customer lifecycle.” Built on the blockchain, KYC-Chain forms an innovative solution to the age-old verification problem. It has packages that serve both the individual as well as the organization. As of April 2020, KYC-Chain has been involved in about 500,000 onboarding verifications and covers approximately 200 countries.
With the help of KYC-Chain, organizations can outsource their compliance processes to an automated process. KYC-Chain can also be used for interoperability, meaning that once individuals finish the KYC process, they do not have to do it repeatedly. In addition, they can share their KYC-Chain credentials.
Btc
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$62.547
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KYC-Chain also supports biometric authentication, cloud storage, APIs, Auto data extraction, and various other services, all of which are secured by the blockchain.
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Sudarshan M
@Sum
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