Does Crypto Have a KYC Problem? Coinbase Hack, Solana Founder Doxxing Reopen Debate

For the users of cryptocurrencies intended for privacy, there may be no terrible three letters from the “KYC”.

Abbreviation, abbreviation for “Know your customer“Refers to the procedure of providing personal data, such as your name and address, certain services providers, namely the Crypto -wave exchange. In many jurisdictions, including the US, it is necessary by law. And although this may be important, perhaps even crucial, in the protection of illegal activity, KYC comes with Ribis– For companies collecting data and individuals that provide them.

Eariler this week, Saltworks co -founder Raj Gokal and his wife are both doxxed from malicious actors who demanded that he pay 40 Btc (worth $ 4.3 million). Gokal says that the photos of his documentation arrived from a knowledge that The procedure, but did not give details.

Getting Doxxed refers to publishing personal information online, and in the worst case it may include home addresses or banks data. In the world of cryptocurrencies, with a large number of anonymous and pseudonym users, the doxxing strips can be low as only one’s real name or face. In the case of Gokal, these are photos of his government card, which included his home address.

This comes two weeks after the largest centralized crypto exchange in the USA, Coinbase, revealed that he suffered a data violationwhich results in sensitive information about customers fall into the hands of the hacker. Techcrunch and founder Arrington Capital -a Michael Arrington predicted it “lead to people die“Like a wave Attempts to abduction Moves the industry.

Many have speculated that Gokalov Dokxxing He came as a result of a coin violation, although it was not confirmed. The incident, however, made users cryptocurrencies alert to compel to be identified exchange.

After all, the KYC processes can often include the demanding of users to photos of their passport, proof of the address and a photo of themselves holding ID. And with crypto abductions in the rise-shaping a number of high cases in France,, USAand elsewhere– Users are afraid that the hackers can steal their KYC information to lead the attackers to their front door.

“When the platform collects too much KYC, it becomes a target,” Nick Vaiman, co-founder and executive director Bubblessaid Decipher. “Once the attackers get access to this data, they can start highly targeted attacks of identity theft or worse, use their personal information to find you in real life and directly rob you,” he said. “Kyc data create risk. The more information you hold, the greater the goal.”

But the future Without KYC, it is simply not realistic, said the co-founder of Bubblemaps and Coo Arnaud Droz. As such, it’s like continuing as a “necessary evil” to prevent criminal activity on the chain.

“Kyc is a key means not only for compliance with regulations but also for crime prevention”, Slava Demchuk, Executive Director of Companions Company Amlbotsaid Decipher. “Although sophisticated criminals can still find ways to do so, Kyc introduces friction that makes their actions make it difficult – and when paired with another [anti-money laundering] Measures such as monitoring transactions and screening becomes a strong defense. “

Due to this important function, KYC is a law in most jurisdictions. This includes the United States, which requires that under the US Act on Patriot from 2001.

Despite its virtues, there was an increase in Industry leaders loudly pushing back Against KYC’s request after hacking coinbase. Erik Voorhees, founder Cryptocurrency Exchange Shapeshift, He called Kyc who called a crime On social media. Coinbase CEO Brian Armstrong agreed with him.

“The basic question is that if you are fraudsters, it is not difficult to bypass the system,” Vaiman added. “You can easily buy a fake kyc or use someone else’s. And with an increase in Ai -ja, generating false identities becomes even easier, which the whole system is weak. Kyc does not stop bad actors and create friction for honest users,” he said.

But if the system, even though it is necessary, is flawed, what can be done about it?

“We see innovative solutions such as privacy zero knowledge and theoretical implementation of zero-knowledge-kyc”, Jeff Feng, co-founder of Blockchain Developer Slower-1 Blockchain You are a laboratorysaid Decipher. “But we have to be realistic – financial systems need protective measures from illegal activities.”

Evidence of zero knowledgeOften called ZK-Otporne, they are a kind of cryptography that allows the user to prove something, such as proving that they do not live in a sanctioned country, without detecting data directly to the recipient.

Amlbot Demchuk believes that ZK-KYC is a great feature for conservation of privacy, but it would be very difficult to implement, because, for example, they would require significant regulatory changes in the EU. This is because GDPR regulations require data controllers, exchange in this case, for storage of data relating to the KYC process for five years. ZK-Kyc would prevent the exchange from ever touching the data, let alone storing it for five years.

No matter how the industry develops on KYC, some users believe that this issue is emblematically more existential problems.

“The ability of an anonymous transaction is a basis for the cryptocurrent currency as a revolutionary technology resisting an invasive state,” ” Charlotte Fangsaid the pseudonym founder of Remilia Corporation, Decipher. “Crypto as an industry strayed from the basic space of the Cypherpunk movement, not just in KYCS exchanges in their pursuit of adoption, but as a culture. “

Proponents of privacy believe in complete anonymity in the transaction on blockchain networks, while regulators are still fighting it. Then again, with an American treasury Lifting sanctions about the conservation of privacy Ethereum mixer Tornado cash Earlier this year, it is possible that the tide“At least in DC – might be Rotation.