The IOTA Foundation, in collaboration with Walt.id, IDnow, Bloom Wallet, and SPYCE.5, has unveiled a pioneering Know Your Customer (KYC) solution for Web3 applications. This has happened amid the increased pressure of the EU and global crypto regulations aimed at curbing money laundering and terrorism financing within crypto markets.
The recent implementation of the Transfer of Funds Regulation (TFR) and the already existing Anti-Money-Laundering Regulation (AMLR) has extended anti-money laundering obligations to Crypto Asset Service Providers (CASPs), including crypto-asset exchanges. CASPs are now mandated to collect user information and verify customer identities for transactions involving self-hosted wallets.
In response to these regulatory measures, Web3 applications find themselves navigating the challenge of identifying users while balancing privacy preservation and compliance with the security principles of distributed ledger technology. The crypto-asset industry anticipates a surge in the need for identity verification tools tailored to Web3 applications.
This move has been made in collaboration with its partners to introduce a KYC system crafted for seamless, efficient, and fully compliant onboarding to any Web3 application. This innovative process focuses on taking care of the essence of blockchain technology which is user privacy at every step.
The remote identification process, initiated by IDnow, aligns with current anti-money laundering and countering the financing of terrorism (AML/CFT) rules, offering both fully automated and human-assisted options tailored to specific needs of the users. Walt.id takes the lead in tokenizing the identification process, providing applications with the confirmation that authentication has occurred with full privacy.
The resulting token, securely stored in the Bloom wallet, becomes a soulbound token bound to the authenticated address. It facilitates on-chain processes, ensuring Web3 interactions with authenticated users without exposing personal information. Identity information can be issued in the W3C Verifiable Credential format, enabling users to share verified information in a permissionless manner in off-chain use cases.
The collaboration between the IOTA Foundation and its partners involves several crucial players. These include IDnow, a top-notch identity verification platform that provides optimized solutions for user conversion rates and security. Walt.id is a renowned open-source decentralized identity and wallet infrastructure provider. Bloom is an all-in-one wallet designed for the IOTA, Shimmer, and EVM ecosystem. SPYCE.5 is a company that specializes in hybrid blockchain technologies and provides dedicated EVM-compatible KYC chain infrastructure.