Anonymity in the cryptocurrency market is an important safety element. Refusal to provide third parties with personal data safeguards users from data leakages and their consequences. At the same time, anonymity in the crypto market conflicts with regulators’ interests. Let’s discover how businesses can help clients in remaining anonymous while transacting in cryptocurrencies without breaking a law.
Short answer: to safeguard your personal data from fraudsters that can use it against you, for example by stealing your money.
In the modern world, information is a valuable resource. Among others, fraudsters hunt for it because personal data can be a key to money.
To assess the scale of the problem from the point of view of business and its clients, let’s dive into statistical data on leakages in 2021:
By far not every company can offer anonymity to its clients. In fact, from the regulators’ point of view, confidentiality opens up plenty of opportunities for illegal activities. For example, anonymous users can unchallengedly finance terrorism.
To prevent the inflow of confidential accounts in the market, governing agencies came up with the KYC (Know Your Customer) procedures. Following the procedure serves to verify the user’s identity. This approach allows regulators to get information on the person of interest, should the specific incident appear.
Upon attempting to “stretch” KYC over the crypto market, the dilemma appears. On the one hand, digital assets by their nature are anonymous. This is the way the creator of the first cryptocurrency BTC, Satoshi Nakamoto, envisioned it. On the other hand, anonymous instruments on the financial market contradict the regulators’ interests.
It appears that governing agencies can not allow anonymous transactions with cryptocurrencies because it entails the risks of illegal activities. At the same time, “stretching” KYC over the digital assets can be a tradeoff for both parties:
This way the crypto community has to put up with deanonymization. This being said, the digital assets market has already come up with some solutions to this problem.
The participants of the digital assets market can remain anonymous while transacting with cryptocurrencies. Here are three popular solutions for the crypto community members that wish to guard their confidentiality.
There are plenty of anonymous and pseudo-anonymous platforms in the crypto market. Usually, such platforms offer registration via email or phone number.
But the payment for working on such a platform has high risks. Should the funds disappear, a user would not be able to prove that it was theft because the transaction was anonymous.
Crypto mixers are platforms that help to anonymize transactions. For that, the platforms “mix” the assets of the users to dissolve the direct link between a sender and a recipient.
For example, users N, M, and V decided to use a crypto mixer platform. Each wants to send 1 bitcoin. They have a need to transfer cryptocurrencies to addresses 1, 2, and 3 accordingly. In a normal situation, the transactions will look in the following way: N –1, M – 2, and V – 3. Instead, the mixer allows erasing the footprint. The platform “mixes” the cryptocurrencies and the transactions go, for example, in the following way: N – 3, M – 1, and V – 2.
Users of such platforms should be ready to spend on fees and agree to the risks associated with such platforms that offer full confidentiality. While using crypto mixers, as well as other anonymous platforms, users are not able to defend their rights, in case of disputes.
The NFT passport issuance and use cases
In that way, the NFT passport Hashbon Pass eradicates the problem of third-party personal data leakages. At the same time, the digital ID helps to save time upon registration on various platforms.
The Hashbon Pass opportunities
Integration with Hashbon Pass is a great way to boost security at your business platforms and increase their attractiveness to potential clients.
Full anonymity in the crypto industry, as well as in the traditional financial market is indeed possible. An example is the NFT passport Hashbon Pass.