As regulations tighten in on crypto, Tron founder Justin Sun says tokenized know-your-customer (KYC) checks will become commonplace.
According to him, one can’t rule out that, for example, the U.S. government will not require anyone swapping crypto tokens to go through KYC checks, meaning that “if you want to develop a decentralized exchange like Uniswap, you also want KYC for all your on-chain users.”
“In the future, we will probably have these kinds of licenses for decentralized exchanges," adding that users will need to comply with "travel rules and anti-money laundering (AML) requirements,” said Sun in an interview with Decrypt.
Naturally, Huobi, an exchange where Sun also serves as an advisor, offered a solution to this in the recently-launched Dominica Metaverse Bound Token (DMBT).
Launched as part of the state-backed Dominica Metaverse Digital Citizen (DMDC) program in April this year, the Dominica Metaverse Bound Token (DMBT) essentially offers tokenized identity in the form of what is known as a "soulbound token" for those who have completed tier 3 KYC verification on crypto exchange Huobi. This level of verification requires users to provide facial recognition, personal information, and also pictures of a national ID.
The push from Huobi, Tron, and DMC Labs (Dominca's blockchain development group), comes with a suite of blockchain-powered offerings: The DMBT token, the Dominica Decentralized Identity (Dominica DID), and a yet-to-be-launched DMC token.
Minted on the Tron blockchain, DMBT gives holders “citizenship” to the Dominica Metaverse.
This, however, isn't to be confused with the yet-to-be-launched DMC token, which, per marketing materials, also gives holders "the opportunity to obtain passports issued by the Government of Dominica."
And while initially, the Dominica Metaverse functions as both a layer for virtual interactions and a marketing tool for the region, the Tron founder believes it has far more potential in other parts of the digital economy.
“As long as you have one recognized platform with KYC, you can use these addresses to sign messages and get access to all platforms," said Sun. "Compound, Uniswap, dYdX, all different kinds of applications can actually use the same soulbound token, the same decentralized ID to verify a person.”
The benefits of such an approach, according to the Tron founder, are that users are still guaranteed decentralization and self-custody of digital assets, while also complying with AML requirements.
“That's why I think there's gonna be lots of use cases for decentralized ID,” said Sun.
Editor's note: This article's title was updated to reflect that the DMBT token does not grant citizenship to Dominica. Information about the DMC token and its potential to let holders obtain a Dominica passport has been added.