Cryptocurrency Regulation: Debunking the Transparency Myth

KYT Over KYC: Addressing "Dirty Crypto"

I've only ever heard of "dirty crypto" and never encountered it myself!

If your wallet receives funds that once passed through entities like North Korea's Lazarus group, tools like Chainalysis or Crystal might mark your wallet negatively.

The shift here is from KYC (know your customer) to KYT (know your transaction), focusing not on the individual user but on the transaction itself.

These technologies are likely to integrate directly into platforms like wallets and DEXs, flagging suspicious assets before they can cause issues.

Combatting Sybil Attacks with DID

Projects are implementing decentralized identities (DIDs) such as Gitcoin Passport and Anima to mitigate Sybil attacks, where users create numerous wallets to exploit services for better airdrops or financial gains.

Importantly, these systems verify that there's a human behind each wallet, reducing the need for personal data.

Tracing the Source of Funds

Typically questioned by banks during the income legitimization process, the source of funds can be demonstrated through transaction history and contracts, particularly in crypto-friendly banks and jurisdictions.

This transparency simplifies tax declarations and financial tracking, maintaining the privacy of personal data.

Decentralized Accounting: A New Reality

Each blockchain network involves managing new wallets, assets, and keys. Without proper tracking, valuable assets like airdrops or NFTs can be lost or forgotten.

Users must handle their accounting, which is increasingly feasible with current technologies.

In conclusion, fears of invasive KYC-AML regulations may be exaggerated.

The real evolution in crypto regulation involves technological solutions that respect user privacy while ensuring transaction integrity.