These days, it is near-impossible to escape decentralized finance (DeFi). After a massive explosion in growth over the last few years, billions of dollars have been locked on various DeFi platforms and the industry is becoming more mainstream than ever before. But with this growth comes some new complications, especially when it comes to regulatory compliance.
The larger crypto industry has had its own complicated relationship with regulators over the last decade and DeFi is seeing the same. However, a new product from Bloom, a blockchain solution firm, could go a long way to overcome these challenges and propel DeFi to greater heights.
On October 14, 2021, Bloom announced the launch of its net product OnRamp that allows for firms to access data as part of KYC and AML compliance while still ensuring privacy. For DeFi companies, offering customers a certain level of privacy and anonymity is one of their biggest selling points and there is concern that as DeFi becomes bigger and thus more regulated, this privacy will have to be sacrificed.
With OnRamp, firms have access to users’ reusable verifiable credentials (VCs) without actually requiring the user to reveal the sensitive information in question. This means that DeFi companies can access information like phone numbers, email addressed and social accounts like Facebook, Google, Linkedin and Twitter. This information can then be used for things like ID verification, sanction screening and PEP Screening.
Creditworthiness and Large Implications
One of the most popular offerings of the DeFi space is collateralized loans and for this process to take place effectively, some level of risk assessment needs to take place and this also can be helped with OnRamp. This is through the accessing of information like bank account activity, bank balances and moving forward, OnRamp has plans to integrate access to traditional credit scores and other indications of creditworthiness.
As DeFi-based loans become even more popular, this will be needed to make sure that loans are only given to the more worthy parties, even as privacy is maintained. Finally, Bloom announced that third party credentials can now be entered into the OnRamp platform via the WACI specification. This is good news especially in cases where there is no existing provision to support local populations.
“We are even more excited about is what our WACI integration enables. Now third party data sources around the world can enter the platform, giving the opportunity for people outside of the standard financial system to prove reliability and creditworthiness. This is a major step for DeFi to go global and truly expand financial inclusivity,” said Jace Hensley, Head of Platform at Bloom.
All this goes beyond just helping DeFi platforms to stay AML and KYC compliant but also means that they will not be shut out of the mainstream moving forward. With these hurdles removed, DeFi platforms can reach their true potential and properly give the mainstream financial sector a run for its money. More announcements are expected from Bloom in the coming months.
Image Sourced from Monccur PR