Bitcoin is, just like any other form of electronic or cash payment, subject to Know-Your-Customer regulatory requirements. Even though a lot of people flock to Bitcoin because of the illusion of being anonymous online, there is very little anonymity to be found in the world of virtual currencies. That being said, blockchain technology could be used to facilitate the KYC process, which is exactly what Tradle is trying to achieve.
Tradle – Uniting Blockchain Technology And KYC Procedures
One of the main reasons why Bitcoin companies face more scrutiny in terms of Know-Your-Customer regulations compared to traditional financial services is due to pseudonymous transactions. Bitcoin transactions have no personal information attached to them, as there is no name, address or phone number associated with wallet addresses.
For multiple governments around the world, this is a major worry, as it is impossible for them to tell whether or not Bitcoin transactions are legitimate, or an effort to launder money. As a result, most bitcoin companies – specifically exchanges- have very strict KYC regulatory requirements they have to adhere to, including customer identity verification.
Tradle, a new Bitcoin startup which recently partook in London’s Startupbootcamp fintech accelerator, the solution is within our grasp. Combining blockchain technology – to store data, offer transparency and associate electronic identities with user addresses – the KYC procedure could become far more simplified for all parties involved.
Taking things one step further, Tradle is eyeing the mobile space very closely; the company plans to release a smartphone application that lets users send required verification documents to banks. Currently, users have to rely on postal services and envelopes containing sensitive information to reach their intended destination.
“Every bank can access this network and eliminate the number of KYC checks that they do today. But even before the network is born, within one bank there is inter-product KYC checks; inter-divisional, inter-location, inter-subsidiary. Those KYC checks are not shared. KYC costs are very high.” – Tradle Founder Gene Vayngrib told the media.
Smart Contracts To Complete Procedure Requirements Automatically
As mentioned before, Tradle wants to create a blockchain-based storage solution for KYC documents, which could even be extended in the future to service Anti-Money laundering purposes as well. But that is not all, as both KYC and AML procedures could then be automatically completed by using smart contracts and removing the human element completely.
“Instead of sending all the data to the regulators to prove that you have done the AML correctly, the bank can prove to the regulators that they have automatic procedures that do AML and do things like report suspicious transactions,” said Vayngrib. “The auditing of the bank by the regulators in such a way preserves privacy as much as possible. The regulator could get information about suspicious transactions without banks sharing a lot of raw, private data with them.” – Trade Founder Gene Vayngrib concluded.
Integrating smart contracts into such a vital piece of the current financial system would give Bitcoin and blockchain technology a more legitimate status. In the end, all parties involved are trying to achieve the same goal: facilitating KYC and AML procedures in a more user-friendly and secure way.
Images courtesy of Tradle, Shutterstock