New KYC/AML Compliance Protocol Proposed by Ethereum Founder Vitalik Buterin
Ethereum founder collaborates with surveillance firm Chainalysis to produce a paper on 'regulated privacy' using Privacy Pools. In the proposal, privacy service users would generate zero-knowledge proof to prove their funds are associated with approved sets of past deposits.
"The core idea of the proposal is to allow users to publish a zero-knowledge proof, demonstrating that their funds (do not) originate from known (un-)lawful sources, without publicly revealing their entire transaction graph."
"This is achieved by proving membership in custom association sets that satisfy certain properties, required by regulation or social consensus."
"Privacy Pools-like systems allow users to achieve more privacy around their financial transactions data while retaining the ability to prove their disassociation with known illicit activity. We expect that honest users will be incentivized to participate in such a scheme by a combination of two factors: (i) the desire for privacy, and (ii) the desire to avoid suspicion."
"The proposal may be a first step towards a future where people could prove regulatory compliance without having to reveal their entire transaction history," the report authors wrote.