Onfido is encouraging cryptocurrency exchanges to undertake safe identification expertise. In doing so, the corporate called attention to the recent story of Stefan Thomas, who has $220 million price of Bitcoin saved on an IronKey that will probably be misplaced ceaselessly if he can not guess the password in his subsequent two tries.
With that in thoughts, Onfido famous that the identical options that make cryptocurrencies so interesting can have a profoundly damaging impression on their total utility. For instance, many individuals turned to Bitcoin exactly as a result of it exists exterior of the normal banking system. Anybody can join an account with out going by a prolonged identification course of, which in principle makes the foreign money extra accessible.
The draw back, nonetheless, is that that framework basically forces every particular person person to behave as their very own financial institution, since there isn’t a centralized authority to assist preserve the system. That implies that common individuals develop into accountable for issues that will usually be dealt with by professionals, which may create issues if these persons are less than the duty.
That’s very true close to safety. Since there isn’t a customer support, Bitcoin house owners shouldn’t have any method to reset a password or recuperate an account that has been misplaced or stolen. As a stands, Onfido estimates that 20 % of all Bitcoin (price round $140 billion) is now fully inaccessible, both as a result of it’s misplaced or it’s locked in inaccessible wallets like Thomas’ IronKey, which has no restoration mechanism.
The truth that cryptocurrencies don’t require proof of identification additionally makes them in style with cybercriminals. In accordance with Onfido, cryptocurrency exchanges have been used to launder $2.8 billion in 2019, a determine that’s attracting the scrutiny of governments and worldwide regulators. If cryptocurrencies don’t discover a method to tackle that downside, legislators might move legal guidelines in an effort to convey the system beneath their management.
Whereas there’s some oversight for centralized exchanges that enable customers to commerce cryptocurrencies for official fiat currencies, the bulk (81 %) of the decentralized peer-to-peer exchanges have both weak Know Your Buyer procedures or none in any respect. Onfido means that exchanges ought to be making an attempt to handle that downside, with KYC and anti-money laundering options that construct belief and enhance the person expertise for on a regular basis shoppers. Doing so might get rid of a few of cryptocurrency’s authentic attraction, however it will additionally fulfill regulators and entice new customers if it makes individuals really feel extra comfy with cryptocurrency exchanges.
Onfido, after all, is a number one developer of distant identification verification expertise. The corporate has supplied biometric onboarding capabilities for several cryptocurrency companies, with Hodlnaut and LocalBitcoins standing as the newest additions to its consumer roster.