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IOTA Proposes KYC Solution as EU Provisionally Agrees to Tougher Due Diligence

IOTA is introducing a KYC system in response to the new EU Anti-Money Laundering and the Transfer of Funds Regulations.

According to a press release, the proposed KYC is meant to prevent money laundering and terrorism financing in the crypto market.

Read Also: IOTA Becomes the First Fully Regulated Crypto Foundation in the United Arab Emirates (UAE)

It also stated in the release that the upcoming EU and global crypto regulations will require obligated entities to implement strict anti-money laundering (AML) and Know Your Customer (KYC) measures.

However, available tools for authenticating users in Web3 applications lack the strong guarantees needed to truly identify the person behind an address on the blockchain.

This is expected to make the demand for simple ID tools for Web3 apps to increase as Crypto Asset Service Providers must demonstrate compliance with the GDPR and align with the new regulations by knowing who they’re doing business with and continuously ratifying this information.

IOTA is Strict With Regulatory Compliance

To provide a solution that meets strict authentication requirements while also respecting user privacy and minimizing the burden on decentralized applications (dApps), the IOTA Foundation is collaborating with a, IDnow, Bloom Wallet, and SPYCE.5 to develop an innovative KYC solution that incorporates tokenization for efficient and secure user authentication in Web3 applications, both on- and off-chain.

IOTA and its consortium are proposing to the EU a system that enables users to verify their identity in Web3 apps without having their personal data recorded on-chain. This KYC solution is capable of meeting strong authentication requirements without sacrificing user privacy and minimizing the burden on dApps.

Read Also: IOTA to Reward ShimmerEVM Testers with 1.3 Million Token Airdrop: Details

According to the IOTA Foundation, the new KYC system will seamlessly and efficiently onboard users to any dApp or app with compliant and regulatory standards. To enable privacy-preserving authentication, each step of the process has been designed to make the user experience as easy as possible.


The new development is seen as the pathway to the needed regulatory clarity for the crypto ecosystem across the world. This is a period of incubation for the crypto industry and its new asset class. So, to make global adoption happen, issues with compliance need to be resolved.

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Solomon Odunayo
Solomon Odunayo
Solomon is a trader, crypto enthusiast, and analyst with over four years of experience in the industry. He strongly believes that crypto assets and the blockchain will continue to gain prominence. At, he focuses on news, articles with deep analysis of blockchain projects, and technical analysis of crypto trading pairs.

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