What is the 'KYC' protocol and why it is the key to the blockchain ecosystem?

1. Introduction.

As a lawyer professionally engaged in blockchain consulting, I must point out that one of the most important things for a real and legitimate crypto project is the initial identification of its users. You know that regardless of whether you use the service of a crypto exchange or simply register a hosted wallet (online wallet) on a given platform, you are always required to identify yourself as a person. This is the automatic technological protocol "know your customer" (from English "know your customer" or "KYC"). It, together with the other key protocol for laundering dirty money (known as "AML" from the English "anti money laundering") are normatively mandatory for every legal crypto project, and this view was laid down in the recommendations that DANS recently published on the topic.

KYC operations have evolved from a rudimentary process into a strict and meticulous practice overseen by the regulatory authorities of every EU member state, including the US. In the past, the manual (paper) and digital KYC process was not cheap, fast and customer-friendly, with large financial institutions spending close to $500 million annually on the KYC process. KYC regulations are becoming increasingly strict around the world, so these costs are expected to rise gradually to staggering amounts.