The Biden administration’s new national standards policy for important and developing technologies may have an impact on KYC compliance in the cryptocurrency sector.
- An official national standards policy for vital and developing technologies has been unveiled by the Biden administration.
- To satisfy the rising needs for AML compliance, blockchain solutions are being developed, such as zero-knowledge KYC verification and passporting procedures employing non-fungible tokens (NFTs).
White House’s Strategy
The Biden administration published a national standards policy for essential and emerging technologies on May 4, 2021, intending to establish standards for innovations like blockchain and digital ID. The strategy statement prioritizes the creation of standards in eight critical categories, including distributed ledger technology and digital identification infrastructure. The administration thinks these areas should be prioritized when developing standards because they significantly impact many critical economic sectors.
Digital Identity and KYC in the Crypto Industry
The distinctive depiction of a subject participating in an online transaction is called a digital identity. Blockchain solutions are actively being developed to fulfill the rising demands for AML compliance in cryptocurrency. Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance is one critical use case for digital identification in the economic sector. Innovations like zero-knowledge KYC verification to conduct AML verification, credit scoring, and comparable information are made possible by the blockchain’s consensus mechanism.
To make off-chain identities accessible, passporting strategies using soulbound non-fungible tokens (NFTs) have also been implemented. However, the government and the cryptocurrency industry have yet to agree on privacy issues, which are still intricately linked to digital identity.
The Role of NIST and the Treasury Department
The federal organization coordinating government standard-setting is the National Institute of Standards and Technology (NIST). The organization is now examining a document that defines a digital identity as distinct from other identities in the context of a digital service. Still, it is optional to do so in all situations.
The government’s work on distributed ledger technology, digital assets, and identity management is spearheaded by the Treasury Department’s Office of Financial Research. The government’s goals in implementing the plan are protecting US consumers and the nation’s role in creating worldwide standards. The approach intends to increase funding for pre-standardization research in the areas that are given priority, promote academic and commercial sector involvement in that research, spend money on training, and guarantee integrity and inclusivity.
Implications for the Crypto Industry
Particularly in KYC and AML compliance, the new White House standards plan may substantially impact the cryptocurrency business. The strategy’s emphasis on developing standards for distributed ledger technologies may result in more government regulation of the industry. While this may increase consumer safety and security, it could also result in higher expenses and administrative obstacles for firms operating in the area.
The strategy’s focus on pre-standardization research and the involvement of the corporate sector and academia could promote innovation and cooperation within the sector. The government may encourage trust and legitimacy in the industry by establishing clear standards for distributed ledger and digital identification technologies, opening up the market to additional investors and users.
Conclusion
A significant milestone for the crypto business is the new national standards policy for vital and emerging technologies announced by the Biden administration. The strategy’s emphasis impacts the sector’s KYC and AML compliance on distributed ledger technology and standards development for digital identity infrastructure. The strategy’s focus on research and collaboration may result in innovation and more industry credibility and confidence. Despite potential obstacles, the approach offers the crypto industry a chance to collaborate with the government to create a more accessible and safe future for digital assets.
