Indochine Counsel

Know Your Customer (KYC) is a major element of most countries’ anti-money laundering legislation. Vietnam is no exception. It has developed a comprehensive set of KYC regulations and have even extended the process to allow for digital KYC confirmation. However, KYC relies on the cooperation of each country.

Know Your Customer (KYC) is a major element of most countries’ anti-money laundering legislation. Vietnam is no exception. It has developed a comprehensive set of KYC regulations and have even extended the process to allow for digital KYC confirmation.

And herein lies the problem. KYC relies on the cooperation of each country. Vietnam may have comprehensive KYC laws for its citizens, but a country like Laos or Cuba or some other lesser developed country might only have rudimentary legislation.

Take Laos PDR, for example. They have KYC legislation, they even have a single portal app for KYC confirmation (even though it doesn’t work), but the information they require to confirm KYC is limited to the Identifications and details of its citizens. Non-residents cannot confirm KYC within the system.

And this is true of most KYC regimes.

Take Coinbase for instance, the largest cryptocurrency e-wallet. When I tried to sign up for an account it asked me to provide ID. I provided a United States passport, but because my IP address is registered in Vietnam, it would not accept that ID as valid because it did not match the types of ID provided by Vietnam’s government. I would need to provide a CMND ID or a Vietnamese passport to satisfy Coinbase.

This is a problem.

If the world is going to continue to move towards an international community, then it needs to develop systems and regulations that can cover activities that reach beyond a country’s borders. And these regulations need to have the ability to extend beyond the likes of the United States FATCA or the EU’s GDPR.

As I’ve written about the Metaverse and recently about blockchains, technology is presenting a challenge to existing sovereignty as imagined by the leadership of traditional countries. It is only a matter of time before technology reaches a point where it becomes impossible to use existing forms of dispute resolution to resolve disputes between users and providers and between users and users.

Court jurisdiction is dependent on geographic boundaries. An act must have occurred within such boundary or have some legal link to that boundary in order for the court there to prosecute the law against the party who committed the act. Where does an avatar live? Where is the cadastral register of the Metaverse located? What if I live in Vietnam but control a website that is located in Canada?

And what if I live in Bali as a digital nomad? How am I supposed to meet Indonesian standards of KYC if I am not issued an Indonesian ID?

KYC, and NFTs, and digital assets exist in a world that has no borders, and trying to impose borders upon it is only going to create problems and difficulties that will develop as conflicts arise and solutions remain uncertain.

How does the Metaverse conduct KYC for users before they purchase meta property? I haven’t spent any time in the Metaverse, but I imagine this would provide an excellent means for criminals to launder money through property investments in the digital realm. Especially because the Metaverse is owned by Facebook which is a United States company and can only perform KYC for United States citizens?

Without regulations that allow for multi-jurisdictional KYC, what is there to prevent criminals and terrorists from accessing huge amounts of property through shell companies? And who is qualified to make those regulations? Is the United States going to become the country who issues the rules for everyone else by default of the fact that Silicone Valley is located in that country?

Increasingly, I see the need for a new kind of digital regulation. A global cooperation that will provide for the possibilities of digital standards in KYC. There needs to be a single solution provided across jurisdictional boundaries that can be used for every transaction in any country.

Perhaps a single identification issued to global citizens. Create an organization that is capable of confirming identifications with each country’s government and issuing a globally recognized ID that can be used for KYC purposes in the Metaverse and for other digital asset trading.

Such an entity might look similar to international government organizations currently in use, but it would also require a sacrifice of sovereignty on the part of world governments.

But so does every aspect of digital technology require such a sacrifice.

Since the dawn of humankind, man has fought over territory. Millions and billions have died over the millenia for the spread of empires and the aggrandizement of rulers. Are we to continue this bloody expansionism in the digital sphere or are we going to move beyond borders and create something new, something that has not been imagined by traditional thought?

How are we supposed to continue into a future that requires different methods of ruling with the traditional power rituals that have been around for centuries. It is only a matter of time before the situation arises where countries start attacking the Metaverse as an agent of the United States government and treating it as a data spy. And unless the current regime of dispute resolution, of KYC, and of digital governance is transformed, they will be justified in so doing.

It’s time to change the traditional methods of government because we are seeing the creation of a challenge to existence at its traditional best. We need something more than national boundaries and jurisdictional disputes. We need something that will provide the means to separate KYC, the Metaverse, and the blockchain from the control of any given government.

What that looks like, ultimately, will need to be considered by thousands of people working in concert and may be difficult, but who said things worth doing should be easy.

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