U.S. Treasury’s GENIUS Act Sets Stage for Privacy-First Crypto Regulation, Says a16z

Because the U.S. Treasury Division begins implementation of the GENIUS Act, a landmark invoice shaping the way forward for stablecoin and cryptocurrency regulation, Michele Korver, Head of Regulatory at a16z Crypto, has issued a robust name for privacy-preserving innovation.

In an in depth contribution to the Ministry of Finance, Korver outlined how decentralized digital id (DID) and zero-knowledge proofs (ZKPs) can revolutionize compliance, making the crypto ecosystem safer, clear and fewer intrusive.

Constructing a Privateness-First Framework for Crypto Compliance

Korver emphasised that decentralized digital id, supported by privacy-preserving cryptography, can obtain two essential targets concurrently: strengthening nationwide safety and defending civil liberties.

She argued that present AML/KYC guidelines are outdated, limiting monetary establishments from adopting blockchain-based id instruments. a16z urged FinCEN to make use of its extraordinary reduction authority to modernize these frameworks, permitting each crypto firms and conventional monetary establishments to authenticate customers via digital wallets as a substitute of centralized databases.

Based on Korver, this method would permit people to manage their private information, whereas nonetheless giving regulators the visibility wanted to stop criminal activity. Applied sciences resembling zero-knowledge proofs (ZKPs) and multi-party computation (MPC) allow authentication with out revealing non-public data, lowering the dangers of surveillance, hacking and large-scale information breaches that usually happen in centralized methods.

Smarter crypto compliance, not stricter surveillance

In its submission, a16z Crypto defined that decentralized identifiers (DIDs) and verifiable digital credentials (VDCs) may help meet obligations beneath the Financial institution Secrecy Act (BSA) and Anti-Cash Laundering Legal guidelines (AML).

Nonetheless, these improvements aren’t but acknowledged beneath the present Buyer Identification Program (CIP) guidelines. a16z urged FinCEN to formally acknowledge decentralized id as a legitimate “non-documentary” compliance methodology and prolong these exemptions to cash service companies (MSBs), a class that features most crypto exchanges.

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The corporate additionally referred to as for clearer definitions to tell apart decentralized stablecoins from funds stablecoins, a transfer that might promote honest competitors and innovation-friendly supervision. a16z highlighted information exhibiting that lower than 1% of on-chain transactions are unlawful, arguing that sensible, technology-driven options, not stricter oversight, are the important thing to efficient compliance.

Crypto Group helps a16z’s privacy-first method

Following Korver’s feedback, crypto leaders and builders inside X (Twitter) expressed robust assist for privacy-first decentralized id frameworks.

Notably, crypto consumer Phan Howellter and builders at Inception praised the initiative, calling it an vital step in direction of accountable, innovation-driven digital finance.

Many see the GENIUS Act as a turning level for the US, providing a possibility to steer the world in privacy-focused crypto regulation, proving that privateness, compliance and progress can thrive collectively within the subsequent chapter of digital asset regulation.