Not surprising! The Libra Association is considering a “stepped” approach to KYC regulations


  1. The Libra Association is considering some radical ways to reach people in certain places without banking services, including a “staircase” approach to implementing your customer (KYC) regulations.
  2. The Financial Action Task Force (FATF) stated that it is willing to work with Libra to explore the possibility of establishing a new digital identity.
  3. Libra believes that blockchain forensics companies such as Chainalysis, Elliptic and Coinfirm will help strengthen the “graded KYC” case by monitoring wallet profiles and transaction history.
  4. Non-profit organizations like the Kiva Foundation may play a key role in the Libra association.

Organizations leading Facebook's "Libra" development are considering a range of methods for connecting people with no banking services in the world to this proposed blockchain network. All of this starts with a basic challenge. When you use a card or phone to buy a cup of coffee, a complex rule system is accompanied by the deal – the ones that check who you are.

Now imagine that you are a villager in rural Uganda and you have a credit line at a local store, such as $10. It is difficult to see how the same type of so-called “know customers” (KYC) requirements will be applied in a space with little infrastructure. Using digital tools to meet the challenges of identifying and accepting non-banking services in the global financial system, Libra and its supporters say this is the biggest opportunity for the project. Matthew Davie, Chief Strategy Manager (CSO) of Kiva, a micro-finance platform in Silicon Valley, one of the founding social impact partners, explained the mission.


He said:

“We must see a systematic change in the way the financial sector operates.”

Kiva recently announced a partnership with the Government of Sierra Leone to use biometrics to distribute digital wallets and record transactions on the blockchain. Kiva is a concept for exploring KYC or tiering, and numbers mean the first step in identifying users when government-issued paper identification is safe. He says:

“In developed countries, we have not really considered grading KYC because we don’t have to do this. All of our transactions are conducted through banks or KYC inspections. But go to a refugee camp, or a village in Uganda. You will find 85% of the transactions are under one dollar. How can you do KYC on these?"

Dante Disparte, director of policy and communications at the Libra Association, also believes that the answer to this dilemma is here, and only KYC needs to be distributed. Taking the existing KYC classification method as an example, combined with the transparency of the blockchain, he told CoinDesk:

“In terms of KYC requirements, a step-by-step approach can be taken, setting a lower threshold on the lower financial threshold based on the dollar or Libra amount of the account, and setting a higher threshold on the higher financial threshold.”

This is a very active concept because of the addition of blockchains.

He says:

“This goes back to the function of the blockchain, which has a network of nodes to verify transactions. The anti-mite modification of the entire engine means that it has only become one with respect to a self-reporting network that relies on competitive banks. A high-fidelity model of real-time risk reporting potential."

He pointed out that the blockchain is a technology that has been around for 10 years, and Vodafone's digital local mobile currency such as M-Pesa has already had an impact on financial inclusion.

“What Libra is bringing is no longer a scientific experiment. We are trying to adopt these mature methods and put them directly in the eyes of financial regulators and policy makers. We say that inclusive finance and regulation are not There is competition; Libra provides the world with a path to large-scale development."

However, it is important to remember that these are ambitious. It is important to be clear that when members of the Libra Association develop their own wallets (including Calibra, Facebook's wallets), these wallet suppliers must ensure that KYC checks meet the requirements and best practices of anti-money laundering (AML) and counter-terrorism financing (CFT). .

FATF effect

However, Libra's idea of ​​the KYC grading method echoes the theoretical work of the Financial Action Task Force (FATF). Libra (especially Calibra) differs in that it can turn this theory into a practical scale that can involve billions of users.

Tom Neylan, senior policy analyst at FATF, told CoinDesk:

"Of course we are willing to negotiate with them (Libra)."

But he also made it clear:

"What we don't want to do is treat them as special cases because there are other stable currency offers and virtual asset providers.

Neylan pointed out that in traditional financial services, the use of real legal currency for grading customer due diligence (CDD) is currently implemented in only a few countries. He said: "The stratification of CDD in the digital environment may be something we must consider in the future, but we have not yet achieved that goal."

The FATF will issue a draft guidance on digital identities later this month, which has published guidance on CDD and inclusive finance, including examples of practical practices from Mexico, Uruguay and India.

Neylan said that the grading CDD involves a limited number of accounts, users can handle a certain amount of business within a certain period of time, such as X dollars per month; no international transactions; savings limit.

This basic method of accounting does not necessarily require a passport or address, Neylan added:

"Things vary from country to country. Where there are no documents, the village chief may guarantee you."

The premise here is that the fewer features, the more continuous monitoring will be done to ensure that users do not violate the rules, which is what the blockchain theory is very good at. Therefore, over time, users can create a financial file.

Neylan said:

“In some cases, it is enough to establish a good financial situation through CDD. Therefore, this may be a model that can be easily applied to the digital world.”

Forensic account

Another industry that sees huge business opportunities in the digital world is blockchain forensics providers such as Chainalysis, Elliptic, and Coinfirm.

In an interview with CoinDesk, Elliptic's CEO and founder, James Smith, summed up KYC's blockchain-based rethinking in this case:

"If you just want to make a $2 deal, we don't need to know everything about you. What we did at Elliptic is to try to reverse it, 'Okay, you don't have to know who they are; we are Try to find out if they are doing something sin and stop them from doing so.'"

Pawel Kuskowski, Coinfirm's CEO and co-founder, said that matching Facebook's profile or similar material to personal blockchain-based trading history is a convincing solution.

"You need to identify this person correctly and get some key data points like name, last name, address. If you think about Facebook, this is a great source of such information," he said.

“Actually, (reviewed) Facebook personal information is much better than the best KYC on the market today.”

The question of how Libra will handle digital identities remains unanswered. However, the white paper contains a short but predictive statement that “the other goal of the Libra Association is to develop and promote open identity standards” and added that

“Decentralized and portable digital identity is a prerequisite for inclusive finance and competition.”

This passage has puzzled experts in the digital identity field, whether Libra will have a new understanding of digital identity and KYC, such as the use of Facebook profiles in certain government-issued areas where there are few banking services.

In this case, the details determine success or failure. Saleem Khan, director of global data innovation at Dun & Bradstreet, a professional services firm, said that a bridge between entities and numbers is needed. He concludes:

“The blockchain and Libra itself can never solve such a problem. Is this person really like what they say?” There is no material proof that this is impossible. You need to know that the person is actually they. The person who said, even if they don't have a bank account."

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