Remember when you first started hearing about Bitcoin? You probably heard that Bitcoin opened up a new world of safety and privacy. And of course, that was true, to an extent and only for a short time. As technical sophistication grew up around digital currencies, the ability to track who owed what became apparent. Essentially, the moment you move out of crypto into fiat and leave a trail, you can be found. So why is this important?
The focus here is a narrow focus on why tracking fungible assets are important, specifically to governments. Yes, there are legal reasons and we want to stop the bad guys. But, at the core is the simple truth that governments want their piece of the tax pie. And this is why going forward most cryptocurrencies will be concerned with KYC and AML. And, you know what, for overall adoption within the world, this is a good thing.
First, what is KYC? No, not a chicken dinner. Sorry inside joke if you are from the USA. Know Your Customer is the correct answer. This has been a big deal in banking and finance for years. After all, you do not want your hard-earned fiat going to someone else, undeservedly. Nor do you want to allow terrorist organizations to flourish.
In its simplest form, KYC means you know the identity of your customer and if you can identify any illegal intentions. Banking specifically has lots of reporting around this, i.e. money laundering, which is AML or Anti-money Laundering
If cryptocurrencies expect to go mainstream, they will have to comply, at least to some degree, with the governing agencies in their jurisdiction. Ok, you're thinking that's not totally true. Well at the moment, the only truly decentralized privacy cryptocurrency that I'm aware of is Monero. Everything else seems to have a level of centralization, a jurisdiction, that they operate in. Vulnerable to laws and regulations. You may have other opinions, time will tell who is right.
But the point is that if cryptocurrencies want to keep up with the fast-paced blockchain expansion, they will need to be accepted by governments.
Remember, everyone liked the open source idea of most of the cryptocurrencies. However, anyone with the skills and expertise, both good and bad actors, may be able to figure out a hack or track for cryptocurrencies. The proof is in the multi-million dollar hacks experienced by Ethereum and several exchanges.
So, the moral of this story is that the implementation of KYC and AML into cryptocurrencies and blockchain benefits everyone. And, helps us get to the end goal of broader adoption.
Picture is courtesy of Pixabay - ID cyber-security-3400657_1920; ID kfc-1574389_1920 ; ID money-laundering-1963184_1920
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