Zero-knowledge Know Your Customer (KYC) would permit businesses to abide by stringent AML/CTF regulations while protecting the privacy of their customers.
According to the partner of a venture capital firm, zero-knowledge Know Your Customer (zkKYC) is becoming more widely discussed as the Web3 industry matures as a means of complying with stringent financial regulations while maintaining user privacy.
John Henderson, a partner at the Australian venture capital firm Airtree Ventures, stated in an interview with Crypto Express that the successful implementation of a zkKYC system would be "great news for both regulators and consumers" and could boost cryptocurrency adoption:
According to Henderson, a zkKYC system would permit users to demonstrate certain aspects of themselves to service providers without revealing personally identifying information like names or identification documents.
In theory, sharing that information would be sufficient to satisfy the crypto industry's Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulatory requirements:
According to Henderson, the advantage of this strategy is that, in the event of a security breach at a service provider like a crypto exchange, no personally identifying information could be exposed, and identification documents could only be recovered when requested by authorities.
The handling of personally identifiable information by some crypto platforms has been criticized by many in the crypto community.
In the wake of court documents that were made public on Oct. 5 and warned that the personal information and transaction history of thousands of Celsius customers could be used to dox users, the community expressed its concerns.
At the September Converge22 conference in San Francisco, loud pleas for individual privacy were also made.
Circle's CEO, Jeremy Allaire, emphasized the need for "advancements" in technologies that safeguard individuals' privacy while simultaneously proving their identities and credentials.
Henderson, on the other hand, acknowledged that "storage of sensitive information is still an unsolved problem" and offered two suggestions for managing such information:
Henderson maintained adamantly that a zkKYC protocol will serve as the "building blocks of on-chain reputation scores" and enable "more useful" financial products and services in spite of the difficulty.
He stated, "If we want to achieve internet scale, we need a solution for AML/CTF compliance." He stated, "My priority is onboarding the next hundred million users to cryptocurrency."
On April 13, ReputationDAO, a decentralized autonomous organization that aims to provide a financial reputation and identity service for decentralized finance (DeFi), raised $4.7 million in a seed round led by Airtree Ventures.
