Regulations around Blockchain & KYC

Blockchain technology is still in its nascent stages. The BFSI (Banking, Financial Services and Insurance) sector has begun exploring the technology’s potential. However, there still seems to be a long way to go for companies to put the technology to use. The reason is that regulations around the technology and its use cases are in development. Yet, Governments and Central authorities have been contemplating on regulations around both blockchain and KYC, as of now.

Regulations around Blockchain

Since KYC is the most important aspect in banking, there have been quite a few regulations around the practice. Similarly, blockchain has also been becoming inevitable, as companies are now vying to utilize the technology to gain competitive edge. So, Governments around the world, besides watching the growth of the technology, now want to enforce regulations. This can either work for or against the development of the technology.

Blockchain: Regulation or Free Market?

One such view is that blockchain is not merely a tool, interface or utility to either ban or to ratify it. In fact, it is synonymous with the internet. It is vast and quite an entity unto itself. Thence, the lack of centralized control has been worrying central authorities. All of us have a common perception that lack of centralized control will lead to heavy risks and instability. However, it is not possible to ban the technology much like the internet can’t be. Blockchain can serve both financial and non-financial applications, as the use cases extend across industries and their applications.

At the same time, regulations can also have an adverse effect on FinTech companies that use the technology. Localized regulations may lead to an exit from the geographical locations of the companies, while general regulations may render the technology unusable. Since financial institutions will benefit from blockchain by eliminating intermediaries, they will look forward to implementing the technology.

Loss of business due to stringent KYC norms

KYC regulations have already made banking difficult for both banks and customers. Both have to go through cumbersome KYC processes to engage in trading, get loans and get clearing and settlement done. While blockchain will ease the KYC process, governments have also been keen on setting up regulations in place. Blockchain, however, as a form of distributed ledger technology, can only make the process more transparent. Yet, central authorities are looking for ways to implement regulations over the technology.

Will Regulations Speed Up Implementation?

Implementing regulations could sure speed up the development of the technology, as Governments assess the outcome in using the technology. The fear of financial instability arises due to the usage of cryptocurrencies like Bitcoin. That, however, is a minor challenge, compared to the benefits the technology has on offer. Nonetheless, risks, instabilities and volatility are part of the centralized financial world too.

Blockchain could save up to $20 billion in costs by 2022, within five years from now. This will sure come as a huge relief to banks, financial institutions and governments.

Key Use Cases of Blockchain

Blockchain is a way out of most of the economic and financial problems of the world. Still though in its nascent stages, it has begun to revolutionize the whole world. Some of the major corporations of the world have begun to scratch the surface of the technology. It is a contemporary living example of how a revolutionary technology emerges from its fetal stages into growing wings.

Blockchain Uses & Solutions

Limitations in current technologies have led to the rise of blockchain technology. The technology finds plenty of use cases across almost all the industries. So, let’s look into some of the key use cases of the blockchain technology:

Perfect Solution to De-Risking or De-Banking

When banks pulled out of smaller economies citing loss as in the Caribbean islands, blockchain came to the rescue. Trade and inward remittances began happening through shared ledgers using bitcoins. The limitations in centralized conventional banking systems did not allow for profitable transactions to take place in smaller economies. Unable to work around the system and the regulations, banks pulled out to make way for blockchain technology.

Smaller economies, especially, have begun lapping up the technology to overcome the limitations in conventional banking. So, stock exchanges like NASDAQ and many other banks around the world have begun testing this new technology.

Easy Remittances

With Philippines being a fine example, remittances around the globe have started happening through bitcoin currency and distributed ledgers. Each country has a different regulation, when it comes to inward and outward remittances. Since blockchain technology eliminates the need for any intermediary, peer-to-peer and business-to-business transactions are made easy unlike conventional banking. Both domestic and international payments can happen quite easily through the blockchain mechanism.

Digital Identity & Digital Assets

Digital identity will form part of one of the most important of functions of blockchain technology. KYC processes throughout the world have been under fire for all their complications. Hence, blockchain-based KYC is the future with its distributed ledger technology. It is sure to make KYC processes easier, transparent and highly cost-effective, due to its shared, decentralized and verifiable nature.

Digital identity gives rise to the recording of digital and smart assets in the blockchain. An individual’s entire portfolio of assets and ownership goes into the shared ledger, which remains anonymous, verifiable and immutable. Digital identity and digital assets will become immediate parts of the blockchain, as soon as the technology goes fully ripe.

Smart Contracts

A Smart Contract is just like how blockchain functions but with the pre-programmed terms of a contract. Execution of the contract happens on its own, when both the parties fulfill the conditions laid out. The smart contract program, upon agreement of price between the two parties, executes the contract and performs the transaction automatically.

The software verifies the owner, performs the transaction and ships the product or transfers ownership registrations on its own. Smart contracts can execute purchase or sale of house, cars, financial instruments, marriage registration, divorce, property registrations, etc. without human intervention. The benefit is that it eliminates intermediaries as banks and brokers or agents and the individual performs the entirely transactions on his own.

The key use cases or application of blockchain technology will multiply in the coming years. It will take over most of the processes of many industries all over the world. It is also set to become an integral part of human lives in all our day-to-day activities.

Problems & Challenges in Traditional KYC Systems

Ever since the global financial crisis in 2008, KYC regulations have become very strict in many countries. This gave rise to a lot of issues, ever since. It turned out to be more of a headache to customers and banks than to make the processes easier.

Problems and challenges of the traditional KYC systems:

1) Inadequate Database

Regulatory authorities in almost all the countries have been penalizing banks to the tune of hundreds of thousands of dollars. This has been done, when banks fail to adhere to regulatory norms. In addition to losing business to fulfilling KYC requirements, banks have had to pay hefty penalties. Bankers blame it on the system and “inadequate database”. Hence, some of the banks have moved towards adapting blockchain technology to solve this problem. There have neither been proper databases nor registries, which led to huge complications in the process.

2) Lack of an All-Encompassing Technology

Currently, banks neither meet nor solve KYC requirements and problems. This is due to lack of an all-encompassing technology. The onus is on banks to meet KYC requirements but the problem is in the lack of a proper system. Even in intra-bank processes, banks have difficulty in handling customer information, as is necessary to meet the requirements of each department. At the same time, if a customer operates multiple accounts in multiple banks, the discrepancies grow even wider. Hence, performing KYC processes only once should suffice, which should then be published, distributed and shared. It is these problems that blockchain technology could conveniently solve, which makes it the technology of the future.

3) Lack of Unique Identification

Currently, many countries, except for few developed countries, lack any system or technology to provide unique documented identification of each individual. Multiple documents issued by multiple authorities do not consolidate into a single verifiable identity. Blockchain technology offers the solution of a digital identity, which will be verifiable by banks and other external agencies. Verifying the unique identity of a customer has been a major challenge for banks at the database level.

4) Onboarding and Overhead Costs

Banks face plenty of difficulties in successful onboarding, profiling and monitoring of customers. Onboarding, in itself, is a cost-intensive activity, while performing KYC checks leads to unwanted costs, effort and waste of time. This prevents banks from concentrating on their core business, while stringent KYC norms can even turn away a good customer. So, currently KYC processes lead to a lot of onboarding and overhead costs, while also leading to loss of business. This is another major challenge faced by banks, which led to de-risking and avoiding business altogether.

The challenges faced by banks in regard to KYC compliance have been huge. Lack of proper systems and inefficient and ineffective technologies are to blame. This is where blockchain could play a vital role in overcoming these problems and challenges in KYC processes.

RecordsKeeper can overcome all the challenges in KYC at a very low cost.

How Blockchain can solve KYC problems globally

KYC (Know Your Customer) became a buzzword, after the 2008 financial crisis. The term became so popular that it is now part of common parlance. So, it predates some history and it did evolve out of complex social, financial and economic causes. In the process, KYC also led to a lot of difficulties in banking for both banks as well as customers.

Blockchain Solutions to KYC Problems

In the meantime, the current crop of technologies did not allow for a complete and effective manifestation of KYC. They didn’t encompass all the intricacies of human behavior nor did they simplify storage methods to encompass them all. This is where blockchain, as a new technology, comes in. It can solve many of today’s KYC problems to help banks concentrate more on their core businesses. Let’s explore how blockchain as a technology can solve KYC problems at the global level:

Onboarding Issues and Solutions

Onboarding has been a costly exercise for banks. It is an immensely time-consuming task as well. This is due to improper registry technologies and services. When a customer wants to open an account, banks send the customer’s personal information to the registries. They store the information in their databases and the customer becomes “KYC Compliant”.

As simple as this might sound, it led to many inconsistencies due to different regulations across different applications. This, in turn, led to repeated and redundant KYC submissions and checks, which cost enormous amounts of time and money. So, blockchain, as a sort of distributed ledger technology, publishes the information across all the nodes, once verified. The data gets decentralized in place of the current centralized registry services and technology. Thus, a KYC once performed can be accessed by multiple nodes with unique permission from the customer. This makes the process much easier, simpler, less time consuming and cost-effective. We at RecordsKeeper are solving this problem by allowing the users to put their personal & official records in the Blockchain locker & use them to get their KYC done. Sign up for the RecordsKeeper to know how it work.

Secure Storage of Data

Decentralized data is far safer than centralized databases. The latter is far more prone to attack, as chances of losing all the information to hackers are quite high. Decentralized data, published across millions of nodes, is highly immutable and less prone to hacking attacks. Since all nodes have to agree on the transaction, the data remains highly immutable. The data is also completely encrypted and anonymous, unless shared peer-to-peer with the bank or the agency by the same person.

Lower Overhead and Operational Costs

From soloed databases to redundant and repetitive checks, centralized database technologies run up costs, time and effort to huge levels. KYC processes are also usually counter-productive or less productive. So, this can lead to a lot of friction preventing banks from providing seamless services.

Thence, from the $6,000 to $25,000 spent on onboarding and $80,000 per petabyte of data, blockchain databases will cost less than just $5. So, blockchain is a technology that will solve many of today’s KYC problems and reduce cost, time and effort to make KYC processes easy and efficient.

Launching In-House RecordsKeeper’s Public Blockchain

Launching in house RecordsKeeper’s Public Blockchain

This blog will help you to setup a RecordsKeeper’s Public Blockchain node on your local machine or remote server, you can download and install RecordsKeeper’s client on a local machine or remote server.

Here are the following steps to be followed to setup a Recordskeeper’s Public Blockchain node.

Step 1: Connecting to the RecordsKeeper Blockhain

To connect to RecordsKeeper Blockchain run the following command in bash or command prompt.

  • RecordsKeeper Testnet

rkd [email protected]:8379 -daemon

  • RecordsKeeper Mainnet

rkd [email protected]:7345 -daemon

When you run the above commands the create a node connected to the RecordsKeeper Main node. The command will automatically sets the permissions and consensus required for the Blockchain.

RecordsKeeper Testnet is a complete open Blockchain, when you connect to the Testnet you will have the permissions to connect, send, recieve and mine but the RecordsKeeper Mainnet is currently under consensus rule for a certain number of Blocks (You can read more about that in the RecordsKeeper Whitepaper) to avoid takeovers. When you connect to the RecordsKeeper Mainnet, you will recieve an address. You can send that address to us through RecordsKeeper Mining Permission .

Step 2: Interactive command line mode

Before we proceed, let’s enter interactive mode so we can issue commands to interact with RecordsKeeper Blockchain.

  • Testnet

      rk-cli recordskeeper-test

  • Mainnet

       rk-cli recordskeeper

Step 3: Some basic commands

Now your node is up and running you can issue some basic commands in the interactive mode to get some feel about the RecordsKeeper

  • To get general information about the RecordsKeeper Node:


  • See a list of all available commands for the RecordsKeeper Node:


  • List you all addresses in the RecordsKeeper Node wallet:


Step 4: Sending a transaction in RecordsKeeper

The RecordsKeeper Blockchain works on the same backend as Bitcoin algorithms. Both the RecordsKeeper Testnet and Mainnet can be used to send and recieve XRK tokens. Use the following interactive commands to send transactions in RecordsKeeper Blockchain.

  • Send

      send address amount (comment) (comment-to)

This command works like publish, but publishes the item from from-address. It is useful if the node has multiple addresses with different amounts. The mining fees is applied as per the transaction size.

This command is used to Send one or more XRK tokens to address, returning the txid. The amount field is the quantity of the XRK token and the address field is the address where you want to send the XRK tokens. This command will use the Node’s root address to send the transaction. Please make sure you have sufficient balance in the Node’s root address for transaction to propogate over the RecordsKeeper Blockchain. You can also provide specific comments for the transaction which are optional. The fees will be applied as per the transaction size.

  • Send from different database

      sendfrom from-address to-address amount

This command is also used to Send one or more XRK tokens to address, returning the txid. Using this command you can specify the from address which you want to use to send the transaction. The amount field is the quantity of the XRK token and the to-address field is the address where you want to send the XRK tokens. Please make sure you have sufficient balance in the from-address for transaction to propogate over the RecordsKeeper Blockchain. The from-address used here is also one of the address generated for the Node. You can also provide specific comments for the transaction which are optional. The fees will be applied as per the transaction size.

Step 5: Publishing and retrieving data in Recordskeeper

The RecordsKeeper Blockchain is a open public Key-Value based Database over the Blockchain. You can use the interactive command line to publish and retirive stored information. As the Blockahin is a shared concept you can view all the published data and retrive it only using a key or address. RecordsKeeper uses the streams to store the data. RecordsKeeper Streams provide a natural abstraction for RecordsKeeper blockchain which focus on general data retrieval, timestamping and archiving, rather than the transfer of tokens between participants.

The “root” stream is open to all and anyone can publish data into the root stream. Following commands will give you a brief about how to work with data over RecordsKeeper Blockchain.

  • Publish

         publish stream key data-hex

  • Publish from a different address

      publishfrom from-address stream key data-hex

This command works like publish, but publishes the item from from-address. It is useful if the node has multiple addresses with different amounts. The mining fees is applied as per the transaction size.

  • Send as transaction

     sendwithdata/sendwithmetadata address amount data-hex|object

This works similar to send, but with an additional data-only transaction output. You can pass raw data as data-hex hexadecimal string. It is also used to publish the data to a stream, pass an object like this {“for”:StreamName,”key”:”KeyName”,”data”:”DataHex”} where stream is a stream name, ref or creation txid, the key is in text form, and the data is hexadecimal. You can pass the amount as 0, if you are only using this to publish the data over the RecordsKeeper stream. You can also send some XRK tokens while publishing the data over the stream. The fees will be applied as per the transaction size.

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