The IOTA Foundation has developed a method to certify Web3 users' identities while safeguarding their privacy. This tokenized identification process empowers users to verify their identity in Web3 applications. Partners such as Walt.id, IDnow, Bloom Wallet, and SPYCE.5 have collaborated with the IOTA Foundation in this endeavor.

To address concerns regarding money laundering and terrorist financing in the cryptocurrency realm, upcoming EU and global crypto regulations will mandate stringent anti-money laundering (AML) and Know Your Customer (KYC) procedures. However, the lack of suitable tools currently hinders implementation.

The recently introduced Transfer of Funds (TFR) and forthcoming Anti Money Laundering Regulation (AMLR) will impose AML requirements on Crypto Asset Service Providers (CASPs), including crypto exchanges, necessitating the collection of user information and identification of customers using self-hosted wallets.

Under the TFR, every crypto asset transfer involving CASPs must include sender and receiver details, akin to traditional bank transactions. Additionally, if transfers exceed EUR 1,000 to or from self-hosted addresses, CASPs must ascertain ownership.

To comply with these regulations, Web3 applications must devise methods to enable user recognition while respecting privacy and security concerns inherent in distributed ledger technologies.

Their approach aims to shield personal data from on-chain recording, granting users full control over their information and enabling identification across multiple Web3 applications.

The IOTA Foundation and its partners have established a reusable KYC system for onboarding users to all dApps and applications, ensuring compliance with regulatory obligations.

Leading identity authentication platform provider IDnow, open-source decentralized identification and wallet architecture provider Walt.id, wallet provider Bloom supporting IOTA, Shimmer, and the EVM ecosystem, and hybrid blockchain technology specialist SPYCE 5 are among the collaborators in this initiative.

These collaborative efforts strive to pioneer innovative KYC solutions for Web3 while prioritizing privacy.