Do you want to “know your customer” better? KYC-Oriented Blockchain Could Be The Next Big Thing…
As blockchain-based use cases continue to increase, it is now believed that the technology can help develop Know Your Customer (KYC) protocols through the decentralization of personal data, along with giving owners full control over their data. It is believed that banks and other financial institutions may use blockchain-based KYC checks to ensure the legitimacy of transactions and to verify the identity of customers.
According to BIS Research, a US-based market intelligence firm, using a decentralized ledger technology (DLT) in KYC compliance programs could provide total aggregate cost savings for financial institutions of between $6 billion and $8 billion per year. “Blockchain-based KYC verification can be an alternative to traditional KYC verification methods. This is because DLT has the ability to enable companies to consolidate information from multiple service providers into a single database. This eliminates the need for a third party to validate the truth of the knowledge ,” Rajagopal Menon, Vice President, WazirX, a cryptocurrency exchange, told FE Blockchain.
Insights from market-oriented research have shown that DLTs such as blockchain can help eliminate inefficiencies and duplication in KYC processes. As stated by DevTeam.Space, a software company, KYC workflow routing can be encoded into smart contracts and standardized across the industry, which is expected to increase the efficiency of the blockchain-based KYC system as it will reduce the need for manual oversight.
“Now that we are looking at different manifestations of blockchain, such as non-fungible tokens (NFT) and central bank digital currency (CBDC), implementing a KYC process in place will ensure that the technology preserves its dignity without being tarnished by malicious use. We believe that it is an essential process for compliance and ethical reasons,” said Ramkumar Subramaniam, co-founder and CEO, GuardianLink, a blockchain-based research and development (R&D) organization.
Reportedly, organizations such as Chainalysis, Bakkt, BitFury, Elliptic, CipherTrace, Blockpass, TRM Labs, among others, are the KYC-based companies that aim to build blockchain and cryptocurrency solutions. As highlighted by Jumio, an online mobile payment company, banks, investment firms, casinos, financial technology (fintech) companies, among others, that handle many financial transactions should inculcate KYC-supported blockchain applications.
It is believed that companies may have the ability to perform well, in terms of efficiency and data security, after leveraging new technologies such as DLT. Insights from SignDesk, a software company, stated that KYC verification is becoming more important for financial institutions, considering the rise in cyber attacks, and decentralized technologies can help make the process faster and more secure.
“Blockchain is an emerging technology and a trust protocol, and over 10 years has been used in industries to build trust and transparency through an immutable origin. The blockchain-based decentralized architecture can help solve KYC problems one way further with immutability and security features I believe blockchain-based KYC applications can ensure faster compliance with the evolving regulatory scenario, emphasized Amanjot Malhotra, Country Head – India, Bitay, a cryptocurrency exchange.
Also read: Blockchain as a resource; how technology can give a new definition of Enterprise Resource Planning
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