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.
Why is it important to remain anonymous?
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:
- 45%. It is the percentage of American companies that faces leakages at least once, according to the Thales Data Threat Report.
- 28%. It is the percentage of leakages that are linked to small businesses, shared The Verizon analysts.
- 4 million. It is a number of data leakage victims. The USA became a leader by such incidents, shared Surshark analysts. The second top country by the number of data leakages is Iran.
2021 Data leakages world map. Source: Surfshark
Analysts highlight that leakages are growing in scale. The more personal information is in the fraudsters’ hands, the higher the crime rate.
Anonymity from the regulators perspective
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.
Is it possible to remain anonymous with cryptocurrencies?
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:
- Regulators will be able to monitor transactions due to the deanonymization of the instrument.
- Cryptocurrency users will be able to continue transacting in digital assets.
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.
Top tools to remain anonymous in the crypto market
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.
1. Operating via anonymous platforms
Pros:
- Easy registration
Cons:
- Low level of security
- In case of disputes, a user will not be able to prove ownership of funds or the developer’s fault
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.
2. Mixers
Pros:
- Easy registration
Cons:
- Low level of security
- No regulation at all
- Often, high fees
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.
3. Registering the NFT passport Hashbon Pass
Pros:
- The NFT passport Hashbon Pass offers a “non-anonymous anonymity” scheme that safeguards users from data leakage while fully satisfying the regulators’ demand for waiving confidentiality among the cryptocurrency market participants.
- Quick registration
- One fits all solution
Cons:
- Developers have not yet launched the Hashbon Pass. The market launch is planned for the end of June 2022
The NFT passport Hashbon Pass is a one-fits-all solution for solving the “non-anonymous anonymity” problem in both the crypto industry and the traditional financial market. Here is how it works:
- A user shares the KYC data with the tried-and-tested Hashbon verifiers. They investigate the data and, if all is accurate, confirm the authenticity and issue the Hashbon Pass. The digital passport comes in a form of non fungible token (NFT). The information is being stored on a blockchain. Therefore, it is impossible to falsify such a passport.
- The owner of the NFT passport Hashbon Pass presents the digital document to the platforms that ask to follow KYC procedure, be it a crypto exchange or a regular bank. But instead of getting personal data, third parties get the confirmation of the person’s identity in the token format. When necessary, governing agencies can request the personal data register from verifiers.
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.