Mainstream Crypto Integration Brings Commerce Offs round KYC

Becoming Mainstream: With its new name, web3, which seems more respectable, cryptocurrency is moving closer and closer to becoming a part of mainstream society. Is it inevitable that some of the core principles of the cryptocurrency industry will begin to fade because they conflict with well-established and law-abiding business practices? Know-your-customer (KYC) procedures are required by law in relation to financial activities and anti-money laundering regulations.
However, cryptocurrency has up to now functioned in a murky, or at best inconsistent, domain, with many platforms and services employing inconsistent techniques. However, as indicated by recent adjustments made to the trading exchange Bybit, the course of action, particularly for centralised exchanges, appears to be limited to one direction: a greater emphasis on mandatory KYC procedures for customers.
The large cryptocurrency exchange has revealed its intentions to require KYC for all users in order for them to use its services. Both new and current clients will be impacted by this new arrangement, which takes effect today. Notably, “security and compliance” and “prevent illegal activities” are Bybit’s first two justifications for this change. Further justifications for improving the user experience are provided, such as “enhanced services,” “exclusive offers,” and “convenience and security.” Remarkably, unlike all of its rivals, Bybit is adopting a comprehensive strategy that mandates KYC for every use of its platform. Even after Bybit modified its strategy, several well-known platforms—like OKX and KuCoin, which both permit non-KYC bitcoin withdrawals—will still permit access to portions of their trading services. Peer-to-peer trading and cryptocurrency ATMs are still possibilities.
Decentralised exchanges like Uniswap and Sushi, however, are committed to the spirit of the technology and don’t require authorization or authentication, nor do they depend on any reliable third parties for use of their protocols. Cashing out to fiat, on the other hand, is not possible on these platforms, and most users encounter traditional formalities at this point of interaction with traditional finance. In order to facilitate cryptocurrency purchases (via MoonPay and Transak, respectively), Uniswap and Sushi are integrated with fiat on-ramps; these integrated providers have their own KYC procedures in place.
Mastercard is a major player in traditional banking that is implementing a web3 approach. It is placing a strong emphasis on user authentication, much as exchanges that are cryptocurrency-native. Through its Mastercard Artist Accelerator, which links musical talent with the digital economy through NFTs on Polygon, and through a cooperation with web3 payment protocol Immersive, Mastercard has made its interest in crypto and web3 clear. As a result, Mastercard developed the Mastercard Crypto Credential standards and infrastructure package, which attempts to make user verification easier across blockchain networks. The theory behind this approach is that it can help meet a variety of regulatory obligations, minimise errors, and enhance customer experiences. In addition to many cryptocurrency wallet providers, The Solana Foundation, Polygon Labs, Aptos Labs, and other blockchain organisations are working together on these advances.
Web3 is the identity of the future, and Aptos Labs and @Mastercard are working together to bring that vision to life with Mastercard Crypto Credential, an on-chain identity and verification framework with several uses in tickets, payments, remittances, and NFTs! In its announcement, Mastercard talks about “instilling trust in the blockchain ecosystem,” but this raises questions about how it might contradict the core principle of cryptocurrency—a trustless system in which there is no need to trust counterparties or third parties because the blockchain network itself permits hard-coded mechanisms for verification.
A Cultural Conflict?
Conflicts between the cultures and modes of operation of cryptocurrencies and traditional banking may be unavoidable as they move towards a tighter orbit.
Decentralisation Is Rejected Verifying One’s Identity in Crypto
Since its inception, cryptocurrency has been committed to defending the right to transact without authorization and opposing the need for identity verification. This has been a key factor in its development.
These are intrinsic ideas about decentralised exchanges. Permissioned rails and third intermediaries are not required for peer-to-peer transactions.
However, in order to adhere to financial regulations and function as genuine platforms, certain compromises are made at centralised exchanges and while interacting with non-crypto consumers. Fewer complaints should be anticipated if the exchange of these values results in a rise in new users and increased adoption.
But there’s also a chance that a new user who learns about cryptocurrency will find themselves switching from centralised systems to decentralised ones. They might learn to value the fundamental principles of decentralisation and trustless systems—which crypto was first intended to enable—along the way.