Is there a KYC issue with Crypto? Coinbase Hack, Solana Founder Doxxing Deopen Debate

For privacy-conscious Crypto users, there are no three letters that are as frightening as “KYC.”

The shorthand for the acronym “know your customer” refers to the process of providing a specific service provider with personally identifiable information, such as names and addresses, or cryptocurrency exchanges. Many jurisdictions, including the United States, are required by law. And while it’s important and perhaps even important, KYC has risks in protecting illegal activities– Both the companies that collect data and the individuals that provide it.

This week’s ear Solana Co-founder Raj Gokal And his wife was both doxxed by a malicious actor who demands he pays 40 BTC (Equivalent to $4.3 million). Gokal says The photographs of his documents came from a I know the customer The process did not provide any details.

Obtaining DOXXED refers to the disclosure of personal information online, and in the worst case scenario, this includes the address of your home and bank details. In the Crypto world, many users are anonymous, so Doxx’s bars are as low as someone’s real name or face. In Gokal’s case, it was a photo of his government-issued ID, including the address of his home.

This happens two weeks after the largest centralized crypto exchange in the US. Coinbase revealed it is suffering from a data breachsensitive customer information will fall into the hands of hackers. TechCrunch And Michael Arlington, founder of the Arlington capital, said, “It leads to people dyingAs a wave of Attempts to invite It wipes out the industry.

Many people guess that Doxxing from Gokal This was the result of a Coinbase violation, but has not been confirmed. Nevertheless, the incident warned crypto users that they were forced to identify themselves. exchange.

After all, the KYC process often allows users to request a photo of themselves with a passport photo, proof of address, and ID. And the increase in code enticing is increasing – France, USand Other locations– Users fear that hackers can steal KYC information and lead attackers to the front door.

“If the platform collects too much KYC, it becomes a target,” said Nick Vaiman, co-founder and CEO of Bubblembaps. Decryption. “When an attacker accesses that data, they can launch a highly targeted phishing attack or, even worse, use personal information to find and take real life directly,” he said. “KYC data creates risk. The more data you hold, the bigger your goals.”

But the future Without KYC it would simply be unrealistic, said COO Arnaud Droz, co-founder of Bubblemaps. So it’s something that will probably continue as a “necessary evil” to prevent criminal activity in the chain.

“KYC is an important tool not only for regulatory compliance, but for crime prevention,” says Slava Demchuk, CEO of the compliance company. amlbotI said Decryption. “While sophisticated criminals may still find ways to avoid it, KYC introduces friction that makes their manipulation more difficult. And when combined with other (money laundering anti-money laundering) measurements, such as transaction monitoring and screening, it becomes a powerful defense.”

This important feature makes KYC legally mandatory in most jurisdictions. That includes the United States that require it under the 2001 US Patriot Act.

Despite its virtue, there was an increase Industry leaders push back loudly For KYC requirements after Coinbase hack. Erik Voorhees, founder of Cryptocurrency Exchange Shapeshift; It is called the National Forced KYC On social media. Coinbase CEO Brian Armstrong I agree With him.

“The core issue is that if you’re a scammer, bypassing the system isn’t difficult,” Vaiman added. “You can simply buy fake KYC or use others. The rise of AI makes it even easier to generate fake identities and weaken the entire system. KYC doesn’t stop bad actors and creates friction for honest users,” he said.

But if the system is needed and yet it is defective, what can you do about it?

“We see innovative solutions such as zero-knowledge privacy and theoretical zero-kyc implementation,” says Jeff Feng, co-founder of Layer-1 blockchain developers. You are a labI said Decryption. “But we have to be realistic. The financial system needs protection against illegal activities.”

Zero knowledge proofoften referred to as ZK proof, is a kind of encryption that allows users to prove something, such as by proof that they do not directly expose the information to the receiver and not live in an authorized country.

Demchuk from Amlbot believes ZK-Kyc is a feature that provides excellent privacy, but it is extremely difficult to implement, for example, as it will require significant regulatory changes in the EU. This is because GDPR regulations require that the data controller, which is the exchange in this case, be stored for five years data related to the KYC process. Needless to say, ZK-kyc prevents exchanges from touching data and keeps them for five years.

Regardless of how the industry evolves in KYC, some users see this as a symbol of a more existential problem.

“The ability to trade anonymously is from bedrock to cryptocurrency as an innovative technology that resists a state of invasion.” Charlotte Fansaid he was the founder of the pseudonym of Remilia Corporation. Decryption. “Cryptography as an industry is not only exchanged in the pursuit of adoption, but also as a culture, not just KYCS, but also from the basic facilities of CYCS. ”

Privacy advocates believe in full anonymity in trading on blockchain networks, but regulators continue to fight against it. Then again with the US Treasury Department Lifting sanctions About privacy reservations Ethereum Coin mixer Tornado cash At the beginning of this year, there is a tide– At least in DC, you need to do so Turning.