Identity verification for the digital assets industry
Fresh all-time highs this month for Bitcoin and Co. were a welcome sign as PXL Vision signed up two new customers from the digital assets space (aka. crypto) for its identity verification services. The first is Canadian Bitcoins, a bitcoin (and other cryptocurrencies) brokerage/exchange from Canada and the second is the BCB Group, a banking partner for the digital assets economy, from the UK.
The digital assets industry
If you are not yet onboard with the decentralized digital landscapes that Bitcoin and Co. are forging, then a deep dive into the world of blockchain should be on your radar. For most, the digital assets that underpin the blockchain are just that, assets, or investment vehicles to speculate on.
There are numerous books to learn the methods of trading cryptocurrencies. A solid recommendation, albeit a little dated by the fast-moving standards of crypto, is Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond. Here is a short review of the book.
However, underneath all the ups and downs of the often-volatile cryptocurrency market, there is a digital-industrial revolution underway. According to an opinion piece in Forbes, the Fourth Industrial Revolution is being built on blockchain. Darryn Pollock writes that blockchain along with artificial intelligence (AI) are beginning to integrate and benefit from one another - especially as Big Data is added to the mix.
“Big Data’s emergence and importance recently have catalysed the relationship between blockchain and AI” says Pollock, though he is careful not to overstate his opinion here, saying that these technologies are still “very much in the nascent state” but definitely moving forward. Pollock adds that the fourth industrial revolution will be the first “that has gone from a technology-focused state to another, more advanced one.” and for that reason it is “not surprising that it could well be predicated on technologies that are currently profoundly misunderstood.”
A working example from Pollock’s thesis is found in Berlin-based IOTA. From their website “IOTA’s Tangle is an open, feeless and scalable distributed ledger, designed to support frictionless data and value transfer… the first distributed ledger built for the “Internet of Everything” - a network for exchanging value and data between humans and machines.”
In other crypto news there are NFTs, aka. non-fungible tokens. This latest crypto craze has seemingly replaced the fervour of the ICO (initial coin offering) craze from a few years back. NFTs are unique and non-interchangeable tokens of value. They are super useful for artists and other use cases, where ensuring the digital uniqueness of something is tantamount – event tickets for instance.
And then there is decentralized finance (DeFi), which aims to be a blockchain-based alternative financial system separate from the traditional financial system. With its origins largely built on the Ethereum network, DeFi is beginning to break out and move/use other chains. Blockchain interoperability or cross chain use is also a growing use case with Polkadot and various other projects forging the path. A summary of the total amount of US dollars currently “locked up” in DeFi can be found at defillama.com. As of the publication of this article, it stands at about $US 275 billion.
Native money for the internet
Perhaps the most interesting blockchain use case is the technological concept of “money” transitioning into a native digital form for use on the internet. This is still largely a matter of opinion and because this process is still only at the beginning, it requires a rather challenging school of thought to comprehend.
However, it becomes all the more obvious, the more time you invest in it and the more you learn about it. Perhaps, the best place to start is with the Bitcoin whitepaper (.pdf), but this should only serve as an intro that will require regular revisits as one descends further down the proverbial Bitcoin rabbit hole. Perhaps the most invaluable resource on Bitcoin, is the What Bitcoin Did podcast and in particular The Beginner’s Guide to Bitcoin found on their homepage.
Bitcoin is the technological solution that digital money required in order to be used peer-to-peer online without requiring a “trusted third party” to verify. Bitcoin solved this by solving the double-spend problem. This is just the beginning. There are numerous other factors at play here, far too many to make space for here.
As humanity continues to transition and digitally build an online culture, then why not money too? Consider for a moment the major industries that have recently been disrupted and transitioned online. Netflix for instance, started by upending the video rental market and then stymied the flow of cinema visits. Amazon started out by disrupting bookstores and then just about everything else retail, including supermarkets. Airbnb reimagined hospitality. Who goes to a travel agent anymore? Uber dismantled the transportation industry. The list goes on.
About 10 years ago, tech-evangelist and venture capitalist Marc Andreessen wrote an opinion piece for the Wall Street Journal entitled Why Software Is Eating the World. In it he writes:
“Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.”
The Bitcoin protocol was released a couple of years prior to Andreessen’s sentient thoughts on software eating the world. Bitcoin was most likely not on his radar at the time, but it certainly is today as he calls it “one of the most amazing things” he’s ever seen. It appears that Andreessen is more interested in other cryptocurrencies these days calling it “a new kind of financial system” where people are “able to form trust relationships in an untrusted environment.”
There is a lot of momentum then to suggest that money will also transition online, but what will it look like? This is the war cry of the Bitcoin maximalists who claim that hyperbitcoinization is nigh. According to Casey Wagner writing for Blockworks “A ‘hyperbitcoinized’ world means the digital asset is regularly used as a transactional currency and held by individuals and businesses as normally as fiat currency.”
There is, however, a lot of infighting in the crypto space about whether or not Bitcoin will suffice as money on its own or whether other tokens will also play a role and to what extent. Regardless, Bitcoin and other cryptocurrencies are well-positioned to take on fiat money for a multitude of good reasons, but the reader will largely have to convince or not convince themselves of that.
Canadian Bitcoins: A Case Study
Canadian Bitcoins is a bitcoin + various other cryptocurrencies brokerage/exchange based out of Canada’s capital. That is Ottawa, for the uninitiated. The owner of Canadian Bitcoins started the company given the difficulties he had encountered when attempting to buy and sell bitcoin for himself.
Buying and selling bitcoin and other digital assets in Canada requires businesses to comply with the KYC/AML regulatory requirements set out by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada). Regulations of this sort are constantly in flux as the standards are always changing to match technological progress as well as political decisions.
FINTRAC provides guidance on 5 different methods to officially identify a person. The first of these and probably the most common method - which is also most pertinent to our identity verification solution - is through using a government-issued photo ID. This method applies only to federal, provincial and territorial governments (i.e. not municipal) as well as foreign government’s photo IDs (if it is considered equivalent to a Canadian document).
This method of identity verification is mostly carried out in person and requires the person tasked with verifying the ID to scrutinize the document in the presence of the person being identified. There is, however, also the option to perform the verification remotely. This is where the technology of PXL Vision comes into play. We are after all a Swiss-based identity verification company verifying the identities of Canadians. It would be a very expensive procedure if we had to carry out identity verification in person!
FINTRAC outlines in its recently updated guidance directives that:
“You may use the government-issued photo identification method if a person is not physically present, but you must have a process in place to authenticate the government-issued photo identification document… when a person is not physically present, you must still determine whether the authenticated government-issued photo identification document is valid and current, and that the name and photo are those of the person providing the document.”
There are two ways to do this as outlined in the directive. The first method is through a live video chat session, whereby the agent determines “whether the authenticated government-issued photo identification document is valid and current, and that the name and photo are those of the person providing the document.” The second method is to ask the person to take a "selfie" using the camera on their smartphone and then use “an application to apply facial recognition technology to compare the features of that "selfie" to the photo on the authentic government-issued photo identification document.”
Identity verification and crypto
While PXL Vision is able to offer the “live video” option in the case study above, our solution is designed around the “selfie” solution. We use our in-house built, machine-learning based technology to first check the validity of the ID card presented. We then apply our facial-recognition solution to compare the photo on the ID with the face of the user submitting the ID. The primary reasons for why this is our preferred method are simple: it’s cheaper, faster and more accurate.
If you are interested in learning more about our automated ID verification technology then check out our blog or reach out to one of our team members at email@example.com.