Call it KYC, crypto-style.
A group of major crypto companies, led by Circle and Coinbase, introduced a digital identity protocol Thursday designed for blockchains, which would comply with “know-your-customer” requirements in traditional finance while giving users control over their personal information.
The system, called Verite, is “designed to enable individuals to have self-sovereign control over their identity” while offering “very strong KYC assurances,” Circle CEO Jeremy Allaire told Protocol. “You can think of it like an identity token in their wallet” which can be used to “interact with these networks.”
Verite underlines the crypto industry’s heightened focus on following established financial services regulations.
The rollout comes a day after another group of crypto companies, also including Coinbase and Circle, said they are building a system called TRUST which would enable its members to comply with the Treasury Department’s Travel Rule, which requires information about big financial transactions to “travel” with the movement of funds.
“TRUST is solving a much narrower problem,” Allaire said. Verite is “something that can be used in any kind of application. It could be used for proving your identity to an NFT market, proving a possession and ownership of an entity. It can be used to prove accredited investor status to a DeFi protocol. It's a very generalized technology.”
The proposal also comes alongside growing concern about centralized identity pools in financial and government transactions. The IRS recently backed off a plan to use facial recognition for authenticating users. And critics have pointed out that systems that accumulate personal financial data are attractive to hackers.
Allaire said the Verite project intends to “use cryptographic proofs of an identity without disclosing the identity information itself.”
“What we want is a world where I, as an individual, can exchange value with another individual or with a business or a merchant or whatnot, and prove to that counterparty that I'm actually who I say I am — that I'm a legitimate individual that's in good standing and has been KYC’d,” he said. “But I don't necessarily want to give them my personal identifiable information.”
To illustrate, Allaire cited the example of the way a bartender could check if a person, say Allaire’s daughter, is of legal drinking age.
“If my daughter walks into a bar, and says, ‘I'd like a drink,’ why does my daughter have to give them her name and address in order to get a drink because you do have to show your ID?” he said. “Why can't I scan a QR code and cryptographically prove that I, in fact, am 21 years old?”
Centre, an independent consortium founded by Circle and Coinbase which came up with the open-source framework for the USDC stablecoin, is supporting the development of Verite. Along with Block, Circle and Coinbase are collaborating on Verite “to promote broader adoption of crypto payments and decentralized finance,” Centre said in a statement. New products and services based on the technology are expected to be released later this year, Allaire said.