DeFi executives on a panel at the WOW Summit argued that implementing Know Your Customer (KYC) measures would solve the “biggest problem” in decentralized finance (DeFi), namely hackers who launder millions of stolen funds into “clean money”.
During a panel discussion at the World of Web3 Summit (WOW) in Hong Kong on March 29, titled “Blockchain Security to Smart Compliance: AML & KYC Solutions in DeFi”, industry leaders endorsed KYC in DeFi as a solution to combat anti-money laundering (AML) issues.
Dyma Budorin, CEO of smart contract auditing firm Hacken, warned of the prevalence of tools readily available to hackers to “launder money” stolen from DeFi platforms, which he described as the “biggest problem” in the industry.
He explained that hackers can easily steal millions of dollars and launder the funds in various wallets – “to make clean money again” – making it difficult to track the source of the funds.
“KYC is about transparency and accountability. I don’t think that’s a problem for most people. I’m sure 99% of people have nothing to hide. I am happy to see him as part of our world.
However, Victor Yim, Head of Fintech at Hong Kong entrepreneurship incubator Cyberport, suggested that KYC alone will not solve all AML problems.
Yim explained that even in traditional finance, where KYC measures are important, “there is still money laundering going on every day.”
From blockchain security to smart compliance: #AML & #KYC For #Challenge The path to compliance is: now is the time to prove that Defi can be secure and compliant @jessecogo Since @Cointelegraph @buda_kyiv @tyyim Alexander Scher @WOWsummitWorld pic.twitter.com/Lk5mnhMKDS
— Charu (@Charu_Sethi) March 29, 2023
However, he believes the KYC measures will create a “brighter future” for the DeFi industry, noting that it will take a collective effort – including “regulators, politics, the bureau and other players” – to execute. with success.
Related: Binance Launches Internal Investigation Following KYC Bypass Rumors
Yim cited the concept of ‘anonymous traceability’ as an example of balancing anonymity and compliance, as individuals can remain anonymous unless called by law enforcement – adding that this will protect good people, while getting the wrong people.
Alexander Scheer, founder of zkMe, pointed out that different mechanisms should be used for different solutions, as crypto mixers, for example, “have to be managed completely differently” from DeFi front ends and on and off ramps.
Scheer also touched on regulation, saying that the DeFi industry should proactively take the lead and “leading edge” regulations, before they are imposed by regulators.