Solving The DeFi Identity Crisis
DeFi continues to explode in popularity. Using Decentralized Finance (DeFi) to trade, borrow, lend and earn yield via smart contracts is reshaping the future of financial services.
Back in April 2021, we noted that — at the time — DeFi Pulse placed the total value locked (TVL) in DeFi contracts at above $45 billion. Fast forward to early March 2022 and that number has grown closer to $80 billion. Potentially even over $200 billion according to DefiLlama.
With that spotlight comes increased regulatory attention.
Some Korean exchanges have begun requiring know your customer (KYC) rules for self-hosted crypto wallets and US regulators might again be considering a similar policy. Meanwhile, the EU is looking at rules that target transfers to unhosted crypto wallets and the Financial Action Task Force (FATF) recently increased its scrutiny of DeFi, DApps, stablecoins and NFTs. Which is important as the FATF provides guidance to its member countries on areas like KYC and anti-money laundering due diligence.
This evolution of “Knowing Your Customer” is shaping up as a centerpiece conversation for 2022 and beyond.
Korean Gov: I'm going to prohibit withdrawals from Korean exchanges to non-KYC'd wallets like Metamask by March 2022.
— Ki Young Ju 주기영 (@ki_young_ju) December 10, 2021
Degens: So no more DeFi, NFT, DAO for Koreans? 😞
Korean Gov: No exceptions. Every blockchain wallet must be KYC'd.
Nice job Korea!https://t.co/i4Hicr9pEO
Why? In response to the above. In response to emerging metaverses and fascinating questions being raised around the future of digital identity and ownership. And also because of a large public appetite to embrace regulatory certainty and increased consumer protections — if we can also protect privacy and security.
That’s where LTO Network’s capabilities for verifiable credentials with Decentralized Identifier (DIDs) come into play.
We’re working to become a streamlined cross-chain solution for DeFi projects (and business) to meet KYC regulations, through our upcoming partnership with Chainlink and its decentralized oracle network.
This sort of optimized verification process will be an excellent use case for our GDPR compliant Decentralized Identifiers (DIDs) platform.
Our development in this area has already seen early discussions with launchpads that wish to abide to (upcoming) regulatory structures, but are looking for suitable and cost efficient options.
LTO Network also supports Self-Sovereign Identity (SSI), where users store and manage their own credentials and opt to only disclose information they choose.
The next steps: Our upcoming NFT2.0 tech will complement our DID capabilities to provide partners with more ways to develop their privacy-aware applications.
Because Decentralized Identities and Verifiable Credentials, powered by LTO Network, are powerful tools to be used by all types of projects and blockchains. And because regulation is coming.