Why Bithumb's entry into the My-ID Alliance is more bullish than you think
Welcome to this week’s edition of Rhizome WIRE!
BitHumb joins My-ID Alliance
On March 31st, Min Kim triumphantly retweeted some news about the My-ID Alliance:
The news, as you can see, was that Bithumb was joining the My-ID Alliance as a growth partner:
Bithumb Korea today announced that they jonied ICON’s MyID Alliance, a blockchain-based digital ID consortium of projects and companies that focuses on developing DID services. They will join several branches of Samsung, several Korean banks, and ICONLOOP, among others, on the MyID Alliance.
According to CoinMarketCap’s adjusted volume ranking, BitHumb is among the Top 50 exchanges in the world, ranked just behind Kraken (in terms of volume over the past 7 days). More importantly, it’s one of the largest exchanges in Korea.
According to the news article announcing BitHumb’s participation:
Bithumb Korea will act as a growth partner that will utilize MyID for ID authentication. Bithumb Korea has joined in what appears to be a trial phase that will lead to greater use of MyID services on Bithumb’s virtual assets exchange. They would likely apply MyID to transactions services to simplify the identification process for members on their trading platform and strengthen personal information security there.
While it’s not entirely clear this is the case, this move may be in response to the landmark changes in South Korea law that were passed via the “Special Act” a few weeks ago. The Special Act was passed to give the “domestic cryptocurrency market clear legal oversight,” according to The Block.
More specifically, the legislation includes the following requirement:
Under the amended law, cryptocurrency companies in South Korea will have to comply with know-your-customer (KYC) and anti-money laundering (AML) requirements, verifying user identities and reporting transactions. Specifically, exchanges, wallet providers, blockchain projects that have conducted initial token offerings now need to partner with an approved South Korean bank to verify the real names of participants and bank account information.
It should be noted that this law won’t go into effect until next March, and the deadline for businesses to be compliant will be September 2021, so exchanges will have time to adapt.
Meanwhile, BlockStar recently conducted an interview (English) with ICONLOOP CEO Kim Jonghyup regarding the My-ID Alliance. This excerpt stood out to me (please be patient with the translation):
“In case of MyID, which will be officially released soon, it can be used in various ways,” Kim further explained. “Currently, overseas cryptocurrency exchanges are the most interested. Since the Special Act is passed, then enhanced identification for its domestic operations should be provided.
In other words, when using KYC, there are many exchanges that ask for easy authentication through digital identification certificates issued by Korean financial institutions. So it starts with identification through KYC, but now we are discussing customer identification for under the Special Act later,” he said, referring to various ways MyID may be used in the future.
Based on these bits of information, it appears that BitHumb, in an effort to fully comply with the new KYC requirements contained in the Special Act, have chosen to participate in the My-ID Alliance for the purpose of being able to utilize DID services for KYC or other authentication on the exchange.
In his quote, Kim Jonghyup says currently, “there are many exchanges that ask for easy authentication through digital identification certificates issued by Korean financial institutions.” Presumably, many of these institutions are those who are already participating in the My-ID Alliance. It would make sense, then, that BitHumb would want to follow these institutions to participate in the My-ID Alliance.
The broader meaning behind Korea’s new law
So just why did Korea finally get around to clarifying it’s regulatory landscape regarding cryptocurrency?
South Korea is a member of the Financial Action Task Force. Here’s a description of the task force, from Sygna:
The Financial Action Task Force is a very influential organization, founded by the G7 in 1989 to combat money laundering and later terrorism funding. It enjoys the support of both the G20 and the United Nations and works closely with these organizations to establish a blanket regulatory AML/CFT policy worldwide.
In 2019, the FATF implemented something called the “Recommendation 16 for Wire Transfers,” which requires:
…beneficiary VASPs obtain and hold required originator information and required and accurate beneficiary information on virtual asset transfers, and make it available on request to appropriate authorities.
and…
…originating VASPs obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers, submit the above information to beneficiary VASPs and counterparts (if any), and make it available on request to appropriate authorities.
(Note: VASP stands for “virtual asset service providers,” which, you can think of as exchanges, but you can click here for the full and legal definition.)
Korea passed legislation in March due to an imminent deadline imposed by the FATF:
Both countries and VASPs will have to come up with a solution to Recommendation 16 before June 2020. With such a tight deadline, they’re under enormous pressure to implement suitable applications to ensure compliance or face walking the plank towards the FATF blacklist.
Sygna points out the obstacles in complying with this new requirement:
There are several issues that stop VASPs and countries around the world from collaborating to create and onboard a suitable solution to Recommendation 16, such as the following:
Cryptocurrency’s underlying blockchain technology doesn’t have an intermediary layer that can collect the necessary personally identifiable information (PII). One must be created.
Any protocol that is adopted by the VASP industry will need to be a technical solution that is scalable, cost-effective, applicable to all virtual assets and quick to install with minimal disruption.
VASPs are usually notoriously competitive with each other, libertarian by nature and hate government interference. The “travel rule” forces all VASPs to work not only with each other but also with the very authorities that they might despise or have rocky relations with.
Massive cultural, linguistic and regional barriers will have to be overcome before a global solution for all VASPs is agreed on.
While these obstacles are significant, VASPs are taking action by collectively establishing and working with self-regulatory organizations (SROs) in their regions to devise a solution that can be uniformly adopted and presented to their countries of domicile as an adequate response to the FATF’s Recommendation 16.
I have bolded the first two issues.
For the first one, the complication is the fact there is nothing in underlying cryptocurrency technology that allows one blockchain to interact and communicate with another blockchain. However, a DID solution that allows for hyperconnectivity may solve this. In other words: exactly what ICON/ICONLOOP has been working on.
For the second one, this is more straightforward. The solution needs to be uniform and simple to use. Again: ICON’s DID solutions.
The other two complications quoted above can’t necessarily be uniquely solved by ICON’s DID platforms, but can be overcome one way or another.
Putting the pieces together
So, where are we at?
The Financial Action Task Force, comprised of the world’s leading countries, has implemented a new requirement on member countries that they implement sufficient KYC/AML regulations over VASPs.
South Korea passing legislation implementing new regulatory requirements on VASPs. This legislation specifically contains a provision noting that the new KYC/AML process includes “a technical solution to collect FATF’s Recommendation 16 “travel rule” identification data during customers’ virtual asset transmittals.”
Citing the passage and future implementation of this legislation, Kim Jonghyup states that “overseas cryptocurrency exchanges are the most interested” in My-ID and “now we are discussing customer identification for under the Special Act later.”
BitHumb has joined the My-ID Alliance to “likely apply MyID to transactions services to simplify the identification process for members on their trading platform and strengthen personal information security there.”
So what could happen next?
It’s plausible that we see Upbit, Coinone, and Korbit (Korea’s other leading exchanges) also soon join My-ID Alliance for the same reasons Bithumb has: compliance with the law.
The “grand slam” scenario from the standpoint of ICON (and ICX) would be that, down the line, ICON’s DID technology becomes the de facto solution for every exchange across the globe seeking to comply with these new regulations. What would this scenario mean? It would mean that everyone in the world buying, selling, or transacting cryptocurrency on an exchange would be using the ICON public chain — either knowingly or unknowingly.
It’s hard to tell at this point how all this will play out over the coming months — but one way or another, Bithumb’s participation in My-ID could be an indicator of more good news to come.
News from ICON World
The next P-Rep Community Meeting will be held this weekend
The upcoming 4th P-Rep community meeting will be held this weekend. Topics for discussion have been posted on the icon.community forum, be sure to watch and see everything that was discussed when the video is uploaded!
The Iconist News has an interview with ZenSports CEO, Mark Thomas
ICONation published new SCORE structures
Brad Laurie joins the ICONPLUS team as an ambassador!
ICON Foundation releases their March roadmap update
ICON Foundation’s March roadmap update has been released. Notable updates include LFT release timing, BTP (Blockchain Transmission Protocol), and IISS 3.0.
The winners of VELIC’s grant campaign have been announced
The My-ID Alliance keeps growing
There have been 5 new partners added to ICONLOOP’s My-ID Alliance.
Understanding the scope and gravity of ICONLOOP’s My-ID Alliance
Recently, RHIZOME has started sharing key facts and a synopsis of each My-ID Alliance partner weekly to bolster awareness of just how large and important ICONLOOP’s My-ID Alliance is.
ICON Foundation announces new LFT2 consensus to unveiled soon
Ricky Dodds shares Q1 2020 performance of various digital assets
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