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Looking back at the history of regulation in the development of encryption

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The market is like this, always evolving, developing, mutating, until it matures.

Original author: Haotian

Recently, Uniswap and MetaMask, the leaders in the decentralized field, have updated their privacy policies one after another. Uniswap will collect user public on-chain and off-chain data to screen the wallet for any illegal activity. Metamask, on the other hand, means that users will collect the corresponding IP address and ETH address when sending a transaction. It is understandable for everyone to resist indignantly, but the game of supervision has long been carried out. Let’s learn about the history here.

A few years ago, FATF Travel Rule 16 required VASP virtual asset service providers, (including centralized trading platforms, decentralized trading platforms, Wallets, etc.) have the responsibility and obligation to share the information of both parties to the transaction, including the sender's name, account address, ID card, and nationality. Even through the form of code embedded in the DLT transaction protocol (smart contracts and multi-signatures, etc.).

It should be said that FATF has always been determined to supervise VASPs.

Centralized VASP is easy to supervise. The trading platform originally collects KYC information very comprehensively, and will naturally cater to the supervision in order to obtain licenses from all over the world. The challenge is nothing more than the problem of synchronizing information between different VASPs. In this regard, three-party platforms such as NotaBene and VerifyVASP provide information filing and verification services. The goal is to encrypt information through public and private keys, so that VASPs can verify the identity of users without revealing user privacy. As shown below:

After the centralized trading platform was incorporated into the regulatory system, Non-custody self-custodial wallets and decentralized protocols became regulatory difficulties. Toutie’s Trezor hardware wallet once integrated the AOPP standard. By verifying the ownership of the user’s address, it can verify whether the user’s self-hosted wallet is related to the identity of its trading platform, and indirectly realize the KYC binding of the self-hosted wallet. However, this small test was shelved under the offensive of public opinion.

However, in April this year, the European Parliament approved The draft regulations explicitly regulate non-custodial wallets. The government knows that it is difficult to forcibly supervise VASPs in a decentralized native environment, so it simply throws the problem to trading platforms with compliance requirements and asks them to assist in collecting information on non-custodial wallets.

In the future, as long as users need the liquidity of the trading platform, they will have to be forced to accept address bindings. But the government may feel that this is passive and lacks strength.

especially the catalysis of the FTX event Effect, regulation obviously intends to speed up regulation efficiency. How to do it? Break down each part. Now Circle’s USDC, Tether’s USDT, etc. are all regulated a little bit. The checking logic is very simple, it depends on whether the blacklist address function is added to the contract code.

Obviously uniswap and metamask are the next move, go The non-custodial space in a centralized environment is gradually shrinking.

In short, supervision is a little bit Infiltration, following the vine branches of centralized VASP, choking the throat of liquidity, trying every means to invade and squeeze the fertile soil of decentralization step by step. The impact is obvious, and the pros and cons depend on how you interpret it. The pure trading market has some regulatory constraints to promote stability, and the decentralized Build market does not want to be restrained, so it needs more innovation and breakthroughs.

The market is like this, always evolving, developing, and mutating , until it matures.

Supplement: Thanks friends for reminding , the content of this post does not discuss whether Metamask collects IP itself, and indeed there are many opinions from Chinese and foreign media. It is enough to popularize science to let everyone understand the regulatory requirements and historical origins of VASP. It is best if metamask and uniswap are not involved, and everyone can pay more attention to the regulatory trends.