a16z: Financial institutions need not abandon permissionless blockchain networks due to compliance risks.

BlockBeats news, September 10: a16z Crypto published an article stating that financial institutions can use and participate in permissionless blockchain networks under existing legal frameworks, and compliance requirements do not mean that banks, brokerages, and asset management institutions must turn to permissioned chains controlled by specific institutions. a16z pointed out that some traditional financial institutions currently prefer permissioned chains, mainly due to concerns about anonymous participants, validators, and potential sanctions or illicit financial activity risks in permissionless networks. However, the U.S. Bank Secrecy Act (BSA) and sanctions regulations require risk-based controls, not the complete elimination of all risks, and financial institutions can deploy compliance measures such as KYC, wallet and transaction monitoring, and sanctions screening at the application layer they actually control.

Permissionless networks themselves are similar to open infrastructure such as the internet, and financial institutions do not need to identify or screen every network participant. The U.S. Office of the Comptroller of the Currency (OCC) has previously confirmed that banks can pay network fees on blockchain networks and hold crypto assets used to pay fees. a16z believes that with the development of technologies such as zero-knowledge proofs, privacy transactions, and proof of asset origin, financial institutions can also meet regulatory requirements without disclosing client holdings, counterparties, and trading strategies. Therefore, compliance and privacy are not inevitable obstacles for financial institutions using permissionless blockchain networks.

Currently, traditional financial institutions including Franklin Templeton, BlackRock, and Apollo have already issued or offered tokenized financial products on permissionless blockchains such as Ethereum and Solana. a16z stated that financial institutions should participate in permissionless networks by establishing risk-based compliance systems, rather than abandoning the relevant infrastructure because of misreadings of existing laws.