Charles Hoskins was responding to the Q&A session during the 2022 Web Summit recently. During the session, he claimed that Decentralized Identification or DID is a critical component of the decentralized sector.
He claimed that DIDs make sure that the users in a DeFi setup are verified and compliant without exposing their personal identification.
He further explained that these protocols make exchanges compliant with anti-money laundering laws automatically.
Under the regulatory requirements of FATF, Coinbase, Kraken, and other cryptocurrency exchanges are liable to ensure anti-money laundering prevention. The Travel Rule by FATF can also restrict the independence of crypto exchanges.
Travel Rule and Cryptocurrency Exchanges
Travel Rule dictates that virtual asset service providers must record transactional data for every VA transfer. This rule is invoked for all virtual asset transactions greater than 1000 USD or EUR limit.
FATF uses Travel Rule to measure the compliance of AML laws in any market. Law enforcement agencies can also subpoena transaction details for an ongoing investigation.
Hoskinson claims that P2P transactions can result in loss of access for investors within self-custodial wallets on account of Travel Rule. He emphasized the importance of DID adoption based on the tenets of the Decentralized Identity Foundation.
He explained that users could conduct transactions between regulated and decentralized with DID for a transaction fee.
Cardano’s founder has stressed the importance of decentralized economic identity for greater financial inclusion. JP Morgan used verifiable credentials embedded in smart contracts for its DeFi trades.
Cardano blockchain is currently running pilots with legacy systems to enable end-to-end transactions in countries like Kenya.
The main idea is to issue reserve-backed stablecoin to a person in a remote location based on their decentralized identity and credit score.
Talking about the matter of Dogecoin’s addition to Twitter as payment, Hoskinson responded that BSC is more suitable for the purpose considering that DOGE has some scaling issues.