Blockchain is one of the major technological breakthroughs of the 21st century. First introduced in 2008, it has undergone both massive upsurges and dramatic drops in popularity. Today, however, there is no doubt left about the importance of this technology. Recently blockchain has been actively adopted by many companies and governmental organisations who are seeking its benefits and opportunities for practical implementation in business and everyday life. It is finally recognised as a phenomenal key technology application which has spread to almost every industry, from the financial sector to agriculture and medicine.

Not only small FinTech startups, but even the largest companies like Microsoft, PayPal and JPMorgan are now implementing it in their business processes.

Yet, according to a Global Blockchain Business Council survey published in Cointelegraph, “63% of senior business executives still lack understanding of blockchain tech, its advantages and potential pitfalls”.

What is blockchain in very simple terms

Blockchain is a public electronic ledger, a database, built up using P2P principles. This database stores an ever-growing list of encrypted transaction records called blocks. Each block contains a timestamp and a link to the previous block.

simple terms

Unlike conventional databases, users cannot change or delete these records but only add new ones. Every time a set of transactions is added, that data becomes another block in the chain.

The use of encryption ensures that users can modify only those parts of the blockchain that they “own”, meaning they have private keys without those it is impossible to write in the file. Plus, encryption guarantees synchronisation of the distributed blockchain copies with other users. So, the only way blockchain can be updated is a consensus between all the chain participants in the system, and once new data is entered it can never be erased.

Modern industries’ jump on the blockchain bandwagon

“Banking services are necessary, banks are not.”

Bill Gates, 1994

Although blockchain technology is constantly evolving, it still has a long way to go. Just as users of financial systems have yet to grow into DeFi, the majority of the companies and institutions are still quite immature about incorporating blockchain into their manufacturing and business processes. But interest in blockchain and asset tokenisation is extremely high, both from traditional businesses and the public sector. Without blockchain, many technological areas such as robotics, artificial intelligence and the internet of things would not have that massive growth we see in these industries today. Blockchain has found application in charities, healthcare insurance, music, real estate, gaming, logistics and many, many other spheres of businesses and everyday life.


  • Secure sharing of medical data
  • Music royalties
  • Tracking Cross-border payments
  • Real-time IoT operating systems
  • Personal identity security
  • Anti-money laundering tracking system
  • Supply chain and logistics monitoring
  • Voting mechanism
  • Advertising insights
  • Original content creation
  • Cryptocurrency exchange
  • Real estate processing platform

Though, it’s financial services where blockchain is shining the brightest today.

According to Allied Market Research, the blockchain solutions market for banking and financial institutions is projected to grow at a rapid pace and reach USD 22.46 billion by 2026, which means growing at an average annual rate of 74%.

The trick is in the primal blockchain concept of removing third parties from the equation; in other words, a financial transaction on a blockchain needs no bank or government backer, which means no fees.

Latest researches and experimentations by major financial world players showed that blockchain means more than just a basis for transactions. The technology has the potential to change fundamentally the processes that underpin financial services.

Blockchain will continue to evolve further due to the massive digitalisation happening in the wake of the COVID-19 pandemic”, predicts Martha Bennett, vice president and senior analyst at Forrester Research,. “It’s a revolutionary technology, and that’s not a bold statement.”

Bennet believes the most successful blockchain-based projects will be those that use smart contracts and tokenisation, but not for optimising existing systems, but for replacing them.

However, blockchain has some problems that still need to be solved.

Question: What is in common between all these activities?

money remittancetelecom
incorporate services trading
fintech advisorsbanking
crypto exchangesreal estate
asset managersmobility
insurance sectorcasinos
investment industrygaming

Answer: They all need KYC.

KYC and AML Solution

Blockchain and International regulations

While understanding the potential and power of blockchain technology, it is important to keep in mind that it can be used both creatively and destructively. A good analogy is the atom fission, a reaction that releases massive amounts of energy. It can be used both for the development of mankind and for its destruction. What matters is how it is applied.

One of the most important provisions in the FATF new recommendations is the obligation of operators of cryptocurrency services to provide each other with information about customers transferring funds between them. This information includes transfers in both fiat currencies and cryptocurrencies. It is KYT as a matter of fact (Know Your Transaction), which incorporates screening and reporting client’s cryptocurrencies for involvement in criminal schemes.

To meet new requirements, cryptocurrency operators and stock exchanges have to create a unified database of their customers and follow new rules:

  • access for users from countries under international sanctions must be restricted
  • anonymous cryptocurrencies must be removed from exchanges
  • branches opened in certain countries, must comply with local legislation
  • exchanges must collaborate with analytical services that facilitate customer compliance and transaction monitoring requirements
  • must stay engaged with law enforcement and tax authorities

Despite the US, where cryptocurrencies have been regulated for several years by solid aml policies, Europe had regulatory uncertainty about digital currencies for a long time.

So, It is not surprising, that after evaluating all the possibilities of blockchain technology, the EU eventually turned its attention to the existing risk of blockchain use in illegal activities. In 2018, the EU adopted the Fifth Directive, which finally came into force in 2020. Although most EU states failed to follow the directive by that time, the next and even tougher challenge is already here: AMLD6

The Fifth Directive requires cryptocurrency exchange platforms, service operators, banks, payment systems, etc to verify transactions, detect and report any suspicious activity. Legislation on personal data protection, control of money laundering and terrorist financing, licensing, certification, registration are other examples of regulatory requirements.

Financial institutions are cautious about regulatory risks. However, they don’t want to fall behind in the blockchain race, which explains the increasing interest in research, adaptation and development of this “revolutionary” technology.

The new regulations have required the introduction of new mechanisms: for instance a user verification system, transaction monitoring and aml procedure. Neither of it is an easy process if you do it in-house and start from scratch.

BASIS ID helps blockchain comply with KYC and AML regulations

The necessity to monitor blockchain transactions, along with sanctions screening and analysis for money laundering plus related criminal activity, has resulted in the growth of companies that help solve this task.

Their services are used by government agencies, cryptocurrency exchange markets, online payments systems, banks and many other financial sector players.

Since fraud detection and Identity theft prevention are essential for all of them —It is no exaggeration to say that KYC and AML service providers’ influence on the industry is growing tremendously.

Verifying customer identity helps prevent cybercrime and offers a simple solution to implement Know Your Customer and Anti Money Laundering standards.

BASIS ID helps blockchain companies to provide effective and frictionless onboarding of their customers in real-time and with 100% fraud protection.  

The company follows every regulatory obligation meaning strong reporting, corporate governance, licensing, and compliance with international laws such as GPDR, data localization laws, and FATF.

Company’s compliance officers backed with AI and in-house developed computer vision models guarantee that blockchain-based companies satisfy all the regional and global KYC and AML regulations. Moreover, BASIS ID enriches the customers’ experience and ensures their trust and loyalty.

As it happened in the case of Coindeal, one of the top exchange platforms for buying, selling and trading cryptocurrencies. CoinDeal focuses on a very high level of transparency, attentive customer service, and maximum security measures.

Company’s internal onboarding analysis showed that the automated verification system of one of the largest KYC vendors could not accurately perform biometric verification and verification of identification documents. This resulted in massive rejections of customers who presented correct data.

Coindeal has implemented the elements of the BASIS ID KYC and AML Solution (widget as a microservice) to ensure the collection of necessary documents for the customer’s identity verification and likeness checking.

The Outcome:

1. Number of customers that were using the services has increased due to a careful approach to verification procedure with no compromise in the level of compliance.

2. Coindeal got the opportunity to work with customers from the regions which are not in service of other providers due to the complexity of checks.

3. Return On Marketing Investment (ROMI) has increased.

With a significant accuracy rate of almost 100% and global coverage in more than 190 countries, BASIS ID is providing blockchain-based businesses with a simple and powerful KYC & AML Solution for verifying their customer’s identity.  

Final Thoughts

The world has been developing in leaps and bounds in recent years. Today the plastic card and smartphone are commonplace in almost any individual’s everyday life, whereas not so long ago those things seemed like utter fiction.

Embracing blockchain technology is the only way for the “old-era” companies to keep their game in a rapidly changing digital world.

Many experienced players understand it. The world’s largest financial institutions start to actively work with the technology, investing both time and money in it.

If you are not operating at the edge of new technologies, you will surely be disrupted. If you are not willing to embrace new technologies like internet of things and blockchain to face those new threats, you are, maybe subtly, at some point … going to extinction”, said Fred Smith, chairman and CEO of the U.S. logistic giant FedEx, speaking at CoinDesk’s Consensus 2018.

Same as the application of many other corresponding technologies, use of blockchain also requires new legal regulations.

Regulations will soon become the norm if we see them not as restrictions, but as opportunities for the entire market development and as a tool for protecting its participants. Moreover, there are numerous examples from various other sectors where revolutionary ideas have been built into the regulatory system over time and continue to work on improving the quality of our lives.

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