There is a myriad of liquid staking solutions out in the market currently, such as Lido, RocketPool, and Coinbase’s cbETH. However, existing solutions can be segmented into three broad categories by their approach to KYC / AML:
- Permisionless: No KYC / AML completed; users can enter/exit the protocol permissionless.
- Hybrid: KYC / AML during the initial staking process. However, the token is available in DeFi and so users can easily bypass the KYC / AML requirements by buying the token in DeFi.
- Fully-Permissioned: KYC / AML completed for all users in the ecosystem, leading to whitelisting of individual wallet addresses. The liquid staking token can only be transferred to whitelisted addresses, ensuring that all counterparties are fully identifiable on-chain if needed.
KYC / AML is paramount to regulatory compliance in the digital asset space. Mixing standard transactions with potentially criminal activities ensures that every transaction within a crypto pool is effectively contaminated.
In a permissionless or hybrid model, users can never be certain that a counterparty isn’t a sanctioned entity, given wallets are fully anonymous (unlike a permissioned model). For institutions with a focus on compliance, Portara’s fully-permissioned model is the solution and ensures that every counterparty has been verified.
Updated about 1 month ago