DeFi: Why KYC is crucial to fight money laundering?

DeFi industry executives talked a lot about the importance of KYC measures at the World of Web3 (WOW) Summit. They addressed the subject precisely during a round table that took place on March 29. They explained that DeFi has a big problem which is money laundering. Here is what leaders are proposing to deal with this problem.

KYC measures alone might not be enough!

Hackers today use decentralized finance (DeFi) to launder millions of stolen funds. DeFi industry executives believe that the implementation of KYC measures will solve this problem. Dyma Budorin, CEO of smart contract audit firm Hacken, issued a statement on the subject. “KYC is about transparency and accountability. I don’t think that’s a problem for most people. Besides, II’m sure 99% of people have nothing to hide. I’m glad it’s part of our world“, he explained.

However, a fintech executive suggested that KYC alone will not prevent money laundering. Victor Yim suggested that even in TradFi where KYC measures are rigorous, money laundering continues. He concretely stated that in traditional finance, “there is still money laundering every day“. Also, Yim thinks that only a collective effort will enable KYC measures to be implemented successfully. Thus, it invites regulators, politicians, offices and other actors to collaborate in this direction.

Alexander Scheer, founder of zkMe, also reacted on the subject. He highlighted that the mechanisms to be used should vary depending on the solutions and cited the case of crypto mixers, indicating that these “should be treated completely differently“. The same mechanisms should not be used with them as with DeFi front ends or on- and off-ramps.

The founder of zkMe addressed the issue of regulation in the DeFi sector, during the WOW summit. He said industry players should anticipate regulations before they are imposed by regulators. Recall that in 2022, the President of the FED had declared that DeFi requires more appropriate regulation.

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