A Singaporean project, traceto.io, is attempting to clean up the emerging world of blockchain technology and cryptocurrency investments by providing know-your-customer (KYC) checks, all in a bid to attract more institutional investors to the field.
A subsidiary of regulatory technology company Cynopsis Solutions, the KYC provider will conduct due diligence on end-investors by partnering with exchanges. It has already signed deals with the Gibraltar Blockchain Exchange and Singapore-based Kyber Network.
traceto.io is a blockchain-based platform itself, and once an applicant completes KYC checks, the results are recorded onto the blockchain, removing the need for end-users to go through KYC checks each time they sign up with a cryptocurrency exchange or initial coin offering on the platform.
In a statement on Tuesday, traceto.io’s CEO Chionh Chye Kit said that the service provider has already helped close to 200 cryptocurrency projects and blockchain-based companies globally.
‘The current standard for KYC in the cryptocurrency space is quite low, as compared to that of the real-world. For ICOs and exchanges that try their hand at KYC, it generally consists of matching a selfie and a passport,’ Chionh told Citywire Asia, adding that more compliant businesses purchase anti-money laundering screening solutions.
‘We break down KYC into four guiding questions: who are you, who are you not, what did you do, and are you still who you say you are,’ Chionh said.
The processes involve the verification of the investor’s identity against documents as well as dealing with the screening of individuals against databases of terrorists, politically exposed persons and financial criminals.
traceto.io is also developing automated tools to conduct checks across these databases and social media websites.
Additionally, the firm will perform ongoing due diligence, such as transaction monitoring. ‘Transaction monitoring, which is the analysis and risk assessment of transactions by a business's end user, is generally unheard of amongst crypto businesses,’ Chionh said.
‘We believe that the regulatory standards in the crypto-world will only become more stringent, and that much of these will evolve to mimic or complement real-world procedures.’
Regulators around the world are clamping down on cryptocurrency-based operators. For example, China, Hong Kong and South Korea have introduced bans and increased supervision in the space.
Meanwhile, in February, the Monetary Authority of Singapore warned that it will regulate intermediaries dealing in virtual currencies to anti-money laundering regulations.
Within the private wealth space, a growing number of family offices are already investing in cryptocurrencies but as regulations fail to keep pace with the explosion in the number and value of these digital tokens, private banks are still choosing to stay away from such investments.
However, they are bullish on the underlying blockchain technology, which could serve as potential investment opportunities or have use-cases in the business, such as the infrastructure for KYC.