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Crypto Regulators Are Coming: Is Digital Identity the Answer?

11 min reading

The regulator is approaching. It is one thing to divide the market function from its parts - trustees, aggregators, and primary brokers - to keep the institutional compliance department happy. Keeping regulators happy is another matter.


The regulator is approaching. It is one thing to divide the market function from its parts - trustees, aggregators, and primary brokers - to keep the institutional compliance department happy. Keeping regulators happy is another matter. From the Financial Action Task Force pushing their travel compliance guidelines to the evolving regulatory framework in the European cryptocurrency market to the rather clumsy US infrastructure laws, regulators are slowly tightening their noose and I fear this could be the start of a perpetual paralysis with decentralized financial markets. (DeFi) is on alert.

Whenever I am asked what the Killer Bitcoin (BTC) app has been like over the last 10 years, my answer has always been "digital identity". Today the world is at a crossroads. One move leads to increased surveillance that undermines privacy now that money is finally tracking information on the internet. On the other hand, is the way personal data goes back into the hands of individuals and emerges from mega-crisis AI databases controlled by a handful of companies and governments. This may be an abomination to early Bitcoin purists, but the reality stings, and with the debate over COVID-19 digital passports escalating, we see a perfect storm cloud on the horizon that will likely be the key story for the year to come.

With central banks everywhere dismissing crypto assets as nothing more than roulette table chips in favor of their own “innovative” CBDCs, the excitement is evident that they can now exercise monetary policy and oversight. Unfortunately, the cryptocurrency market has fallen victim to their success, leading to regulators reloading new ones. The higher this "market cap" (up to $2 trillion earlier this year), the itchier regulators. The Chinese have simply taken the hammer approach and banned everything (except of course the recently introduced CBDC), while in the West the regulatory authorities (at best) have acted in nuanced ways or debated amongst themselves over whose jurisdiction should be. be under it.

Since most crypto-economic activity still takes place through major crypto exchanges and OTC offices, the FATF enforces compliance with Virtual Asset Service Provider (VASP) travel rules. can be identified. But what happens if or when a self-sustaining crypto economy emerges where the majority goes beyond speculation and instead “gets in” and stays “in”? Or what if DeFi goes beyond its significant but nonetheless special playground? After you've spent the last decade or so pushing anonymous "physical money" out of the system and rare transactions for a few hundred dollars, can you imagine the bruising when Satoshi's original vision of an "anonymous money system" actually grew? If you want to know the answer, just look at what happened when Mark Zuckerberg, through his project for Stable Coin Diem (formerly Libra) that could reach three billion, dared to choose one such idea. to come to users overnight - and Diem (which should be a regulator's dream) has a digital identity written firmly in the design protocol from the start!

Sometimes these people don't see tree for tree. In recent years there has been an endless debate about the flexibility of Bitcoin (or any other cryptocurrency) as they can be “polluted” if or when they are tracked for malicious use. Blockchain transparency has proven to be a useful tool otherwise unavailable to law enforcement agencies, while hackers tend to believe that turning away from “useful” fiat is far from easy as stock exchange listings are blacklisted into wallet addresses. But "money" itself can't be "clean" or "dirty", "good" or "bad"? Surely this is just a boring object (or database or "block" record)? Surely only the identity of one of the transacting parties (albeit subjectively) can be judged as good or bad? Not that this is just a debate from afar. You can go back to 18th century English court cases and find that they were controversial (and corrected) long ago.

Aside from Zuck's apparent intention to Diem, luckily, I'm not alone in my longstanding view of the role decentralized identity (DID) can play in our crypto and non-crypto criteria. With all the excitement on crypto Twitter that has little interest in bitcoin from all the well-known tech brands, the fact that the boring old Microsoft started in 2017 has digital identity as the chosen case for using “blockchain.” "To explore, relatively strong, garnering little attention. It's not those others in the crypto industry aren't equally aware that this will be an important part of the infrastructure. Projects such as Civic (2017) and GlobalID (2016) have been in development for several years and the topic of confident identity, where individuals – not large central databases – maintain personal control over their identities and do not decide who to share with technology companies, again becoming main agenda.

With privacy being an issue for regulators and a challenge for most businesses with an online user base, one might think that these ideas are being adopted by regulators as well as businesses. And maybe, just maybe, regulators will join us as the crypto industry proves they can build more secure and robust systems. The system must meet regulatory requirements to identify transaction parties in peer-to-peer payments so that more institutional players with their sleepy compliance officers can safely enter the crypto market overnight. After all, Google and Facebook will have to suffer the most if decentralized digital identity prevails. Without our pimp data, they'd be in a mess.

There have been murmurs of disapproval over the response to this Call for Decentralized Identifier Verification (DID) v1.0 from the World Wide Web Consortium (W3C). Will the turkeys consciously choose Christmas or will they eventually have to live with the inevitability, as the major telecommunications companies had to do in the 1990s when they were armed with the ideas VOIP users wanted. Can Skype get away with allowing free calls to everyone? I think the masses, armed with the right tools, will eventually win, but one thing is certain: the battle lines have been drawn. So, grab some popcorn and relax. This battle has only just begun and will last for a few more years, but when it's over, cryptocurrencies everywhere may finally experience the global adoption they've been dreaming of.

Smart loudspeakers have become an integral part of our daily lives. In short, we can instruct the device to respond to our shopping inquiries and requests. Simply ordering a diaper or getting a weather report is now relegated to the corner of your brain where what you ate for breakfast this morning; You can remember it, of course, but not without great effort. But don't forget our device. Nor do the companies that produce them own all of the data collected through our interactions. Likewise, the new oil data. These are commodities we cannot see or touch; We can't process it for food production, nor can we use it to charge engines under the hood of our cars. But it is in abundance; it is renewable and consumers continue to operate these machines through their daily interactions with the digital world.

We can thank smart devices everywhere that follow the example of social media platforms combined with the relatively low cost of building networks that manage them. This is the perfect system - one where data collection becomes cheaper over time as the value of your property grows exponentially. Collecting and storing this data is generally not a bad practice. It is used to drive smart cities, train artificial intelligence, and even drive political change based on public opinion. Calling the practice evil is myopic and a black and white solution to a problem bathed in gray. Part of the problem is management.

There are important questions to be asked and few regulators are prepared to answer them. Few are aware of the extent of this survey method, nor are they aware of the vast behind-the-scenes market where data is bought and sold as if it were cattle in the market. Apart from targeted advertising, little is known about how this data is used and the danger it poses to our lives now and in the future. Get your medical history. Medical professionals and insurance companies are legally - and under professional oath - obliged to treat this information confidentially.

 However, Google, Apple and Amazon do not. Even without direct information from your doctor or pharmacist, knowledge of these companies is sufficient to paint a very detailed picture of your vital functions. Remember, these are the companies that have access to your email, search history, location data, shopping habits, and often your photos. Google can read your spreadsheet of dosing instructions or find a list of depressive episodes that you registered with a Google Doc to share with your psychiatrist. Even this postoperative care PDF is used to teach AI as we speak.

This is just the tip of the iceberg. Amazon and Google are currently filling your home with devices that are always on and listening. Smart TVs collect data that is sold to almost anyone who wants to buy it, and sometimes even record it for you with the built-in camera and microphone. And then there's Facebook. Over the course of its history, Facebook has not only shown little respect for protecting its users from misuse of data, but has also experimented with actively manipulating them to behave in very specific ways. But even if nothing bothers you and you are willing to pay the price for the convenience of continuing to use your favourite free service, then you should start thinking about the future.

Facebook, Google, Amazon and others will argue that they don't sell this data, a point of discussion meant to reassure awkward privacy officers. And while this may or may not be true - everyone gets caught saying something and doing something different - imagine the potential for future breaches or abuses of privacy. Imagine entrusting non-profits with information security that rivals our most advanced government agencies by three letters. And imagine the apathy of most people who continue to feed the insatiable machines of our own creation.

Starting with education as well as most changes in consumer behavior. It teaches the public that free is not free, and if they value privacy, they will be better able to pay for a service or choose a service that works with a business model they can adopt. Ask yourself what you are willing to sacrifice to share political posts and memes on Facebook. Are you ready to let Google track you for slightly better search results than the competition, both online and offline? Did you know that this product is cheaper on Amazon, or did you just stop shopping comparatively? Informed consumers can and should look for alternatives to mass service.

From customer service to business opportunities, our daily lives and the convenience of the internet are traded with an undeniable loss of trust and confidentiality. This could lead to enthusiastic adoption of decentralized digital identity protocols to provide much-needed security. But we're not there yet. So that makes each of us spoiled for choice. And if you're looking for a friendly alternative to large platforms and apps, this is not in short supply. The decision is yours: continue to use the Internet as usual or take the necessary steps to protect yourself from companies that then collect weapons data for use against us. If you're looking for a change in the law, don't count on it; Few politicians understand the scope of what we are dealing with on a meaningful level. It is up to us to adapt and adopt new products and technologies that are incorporated into our ideology. You are a catalyst for change.

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