KYC was sold as “safety.” In reality, it’s surveillance. Every bank, exchange, and fintech app is a checkpoint. Upload your passport, hand over your life to a database, and hope it doesn’t leak.
Equifax in 2017. Celsius in 2022. Hundreds of millions of people exposed. A password can be rotated. Your passport cannot. Once it’s out there, phishing follows you forever.
But KYC isn’t just a privacy disaster—it’s a blocker for innovation. Without verifiable digital identity, the digital economy is stuck in overcollateralized loops:
- Want an onchain loan without $10,000 of crypto to over-collateralize? Forget it.
- Want to issue uncollateralized credit to freelancers or small businesses globally? Impossible.
- Want to trade tokenized securities or participate in DeFi credit markets? Not without identity to anchor trust.
Digital identity changes everything. Suddenly, your reputation, your claims, and your creditworthiness are portable, cryptographic, and verifiable, without uploading sensitive documents to a dozen honeypots. You can onboard across borders, prove uniqueness, and unlock markets that were previously inaccessible.
Bitcoin showed us that money can be sovereign. Identity is the next frontier: self-sovereign, portable, resilient, and owned by the individual, not corporations or states.
Models for the AI and crypto internet era
1. Keys-as-identity (Bitcoin style)
Your private key is your identity. Pure sovereignty. But if you lose the key, you lose the identity. Permanently. Money can be replaced, but your reputation and claims? Gone.
2. Biometric recovery (Worldcoin style)
Worldcoin is controversial, but the mechanism is powerful. Anchor identity to a unique biometric—like an iris scan—to survive key loss. The biometric itself doesn’t live onchain; it just grounds the identity. Keys may vanish. Eyes don’t.
Worldcoin could succeed as a global neutral infra layer, solving the portability and recovery problems Bitcoin-style identity can’t. Adoption hurdles remain: privacy skepticism, regulatory uncertainty, logistical onboarding friction, and unclear token utility. But if the network grows, it can unlock global credit, reputation, and access—without KYC.
3. Government-issued decentralized IDs
Estonia’s eID, the EU’s EUDI Wallets, and other state DIDs let citizens prove claims without oversharing. These are permissioned identity zones: legally recognized, regulated, and trusted by governments—but siloed. An Estonian eID won’t get you credit in Nairobi.
KYC was never going to cut it in the AI era
KYC is a relic of the paper age. It was never designed for the internet, let alone programmable money and global identity. Centralized databases leak. Forms get copied. Phishing never stops. Meanwhile, markets remain overcollateralized, credit is restricted, and innovation is throttled.
The future is cryptographic identity as the ultimate collateral:
- Portable across borders
- Resilient to key loss
- Verifiable without exposing everything
- Neutral, not tied to a single government
These new layers form a complete identity stack. Worldcoin’s biometrics provide a global, recoverable base. Government DIDs overlay compliance for regulated markets. Bitcoin-style keys ensure sovereignty for users who want it. This hybrid unlocks secure, compliant onchain credit and securities, supporting everything from DeFi loans to tokenized equities. KYC’s flaws—centralization, leaks—fade away.
The digital economy gets the cryptographic, layered identity it’s always needed.