How Newrl’s KYC solution removes anonymity and enables compliance with public blockchains | Interview

Failure to enforce KYC at the chain level is one of the biggest reasons behind the misuse of public blockchains by money launderers and terrorist financiers. India-based Newrl blockchain recently launched a solution to this problem. Newrl has introduced the first of its kind KYC integration solution for public blockchains, which will enable compliance for businesses and regulators by removing the anonymity of blockchains. It can also open the door for typical businesses to start embracing blockchain technology to improve their processes and expand their markets. In an email interaction with financialexpress.com, Newrl founder Swapnil Pawar shared more details about the new KYC solution, security issues and why KYC in the chain is important for public blockchains. Edited excerpts:

What is the new KYC solution offered by Newrl? How to do it works?

Newrl’s KYC solution will enable compliance for businesses and regulators by removing anonymity on a blockchain. This opens the door for typical businesses to start embracing blockchain to improve their processes and expand their markets. Newrl accomplishes this by including digital fingerprints of KYC documents (called “hashes”) for each wallet on it, along with information about the owner’s jurisdiction.

The wallet owner is required to either use a centralized authentication service or use a non-custodial wallet application to ensure the authenticity of the KYC documents. However, actual documents and information such as name and tax ID are not public. In this way, Newrl manages to maintain privacy while ensuring compliance with KYC / AML standards.

How will this KYC solution help businesses and increase the chain match?

The solution is built in a way where companies do not necessarily need to integrate the KYC solution into their own application, which frees them from security issues. The information is easily accessible to existing and new businesses, by asking users to provide a temporary “view-only” access. Since companies would not be “custodians” (processors of these documents), their regulatory concerns are significantly reduced. No other blockchain currently enforces KYC standards at the chain level.

Due to their libertarian foundation starting with Bitcoin, most public blockchains are built on the premise of anonymity. While this avoids censorship, it also opens up these chains of abuse by money launderers and terrorist financiers. Newrl aims to target this issue with its KYC solution. This allows users to be compatible in all cases in the chain while remaining on the white side of regulatory laws.

How and where can companies use this KYC solution?

Companies do not necessarily have to integrate the KYC solution into their own application, which frees them from security issues. This will be the most important selling point for KYC solutions for businesses.

The wallet owner is required to either use a centralized authentication service or use a non-custodial wallet application to ensure the authenticity of the KYC documents (all of which are to manage and control users’ KYC details). However, actual documents and information such as name and tax ID are not public.

ALSO READ | Nirmala Sitharaman’s latest statement banning cryptocurrency in India

Are all blockchains inherently secure? What are the threats blockchains face?

Blockchains are definitely vulnerable to a number of technical issues similar to any other technology product. Some of the most important of these are- 51% attacks (gaining control of the chain through pooling – arms race from the blockchain era), Phishing attacks – On non-suspicious naive users (who do not have much knowledge of the technical aspects), Sybil attacks (another form of 51% attack using fake nodes), and various other traditional technological loopholes can also be used to overwhelm a weaker network.

However, Newrl is protected against all these types of attacks. We also work actively to address recent technological failures that may occur in the future, together with our dedicated security team to always maintain a safe and secure network for our users.

Why do you think the KYC solution on the chain is necessary for public blockchains?

In recent years, several important milestones have been achieved in the fight against black money – through the efforts of institutions such as the Financial Action Task Force (FATF). It is important not to lose ground to money laundering ecosystems through purely anonymous transactions on the blockchain. The identity of the chain layer brought in by Newrl is aimed at ensuring that normal use of the blockchain complies with KYC / AML standards. “

By using our solution, we aim to break a whole new path for blockchain innovation, while at the same time complying with the authorities’ highest standards. This solution will finally allow the blockchain to be implemented in real use cases, away from the core innovations for the web3 enthusiasts it was limited to.

What is Newrl?

Newrl is currently based in Mumbai and Bangalore. (places where we have a physical presence such as in offices). Newrl is a “Trust Network” blockchain built for decentralized social finance founded by Swapnil Pawar. The company enables individuals and small businesses to access capital from their communities by using their credibility and tokenized assets as collateral.

Newrl simplifies legally robust tokenization of assets such as shares, real estate and start-up shares. It also makes it possible for individuals and small businesses to tokenize new forms of assets such as personal creditworthiness, income from social media, patents, invoices, brands, stock receipts, etc.

For illiquid assets, Newrl supports a reciprocity mechanism to facilitate liquidity, and also helps to use them as collateral in a loan. Newrl focuses more on real-world assets, with the support of physical assets that reduce the extent of many types of fraud (eg, double lien fraud, etc.), and promote belief in the “trust network”.