DeFi executives at the World of Web3 (WOW) Summit in Hong Kong argued that the implementation of Know Your Customer (KYC) measures will address the “biggest problem” in decentralized finance (DeFi), which is hackers laundering millions of stolen funds into “clean money.”
During a roundtable discussion held at the summit on March 29, titled “Blockchain Security to Smart Compliance: AML & KYC Solutions in DeFi,” industry leaders endorsed KYC in DeFi as a solution to address anti-money laundering (AML) issues.
Dyma Budorin, CEO of smart contract auditing firm Hacken, He warned of the prevalence of readily available tools for hackers to “launder money” stolen from DeFi platforms, which he described as the industry’s “biggest problem.”
He explained that Hackers can easily steal millions of dollars and launder the funds across multiple wallets “to make clean money again,” making it difficult to trace the origin of the funds.
“KYC is all about transparency and accountability. I don’t think it’s a problem for most people. I’m sure 99% of people don’t have things to hide. I’m glad he’s part of our world.”
However, Victor Yim, head of fintech at Hong Kong business incubator Cyberport, suggested that KYC alone will not solve all AML problems.
Yim explained that even in traditional finance, where KYC measures are prominent, “money is laundered every day.”
Blockchain Security to Smart Compliance : #AML & #KYC for #DeFi Path to compliance is : Now is the best time to prove that Defi can be secure and compliant @jessecogo desde @Cointelegraph @buda_kyiv @tyyim alexander scheer @WOWsummitWorld pic.twitter.com/Lk5mnhMKDS
—Charu (@Charu_Sethi) March 29, 2023
Blockchain Security to Smart Compliance: The path to AML and KYC compliance for DeFi: Now is the best time to prove that Defi can be secure and compliant.
However, he believes that the KYC measures will make for a “better tomorrow” for the DeFi sector, adding that it will require a collective effort, including “regulators, policies, bureaus and other actors”, to be successfully executed.
Yim cited the concept of “anonymous tracking” as an example of balancing anonymity and compliance, where people remain anonymous unless requested by law enforcement, adding that he will “protect the good people while still catching the bad ones.”
Alexander Scheer, founder of zkMe, stressed that different mechanisms should be used for different solutions, as cryptocurrency mixers, for example, “should be treated completely differently” than DeFi front-ends, and on-ramps and off-ramps.
Scheer also discussed the regulations, stating that the DeFi sector should take the lead and “get ahead” of regulations before they are imposed by regulators.
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