Integrating regulation into code - developing solutions for compliant DeFi by Walter Strametz

Transcript

foreign [Applause] so this is just a flash talk so it's not going half an hour a couple of minutes and then we're ready to have lunch so I'm from coming from Switzerland we are a bank I guess we are quite a different animal than the most of presenters here and uh yeah you can see what services we are offering but I want to dive deep in a very specific problem of defy which is still unsolved and not many activities in there actually so the problem we have here with General

edify is if you have a smart contract like the Ave as soon as you have unchecked funds going into a pool then this pool or funds which are in a smart contract are not usable it for institutions because you don't know where the funds are coming from they might come from uh matter countries like North Korea and you're not allowed to use those funds because but you can't you don't know where these funds are reaching from so as soon you have basically uh one party is if one part is able to issue funds in such a pool then it's basically red flag then you can't it's basically you you can't adopt the system you can't adopt they are a smart

contract and know in The Regulators won't accept your business so this would be a problem so one solution is uh whitelisting you can write at least any entity or any smart or any wallet who wants to put funds in there that's of course cumbersome that's also uh very centralized another solution is like are we Arc is doing like only to let institution do into the fund but it's also very centralized because then the institutions would pick the people and also the smart contracts what to do and that would take a lot of time so what can we do if we don't get regulated you know all the problems we have we can't grow and uh there is a limit to this guy

if we can't make D5 more more regulated so we are still exploring the possibilities and what we are working on now is an idea uh combination of uh using flexibility ethereum tank charting so off-chain data and also CK knowledge proofs and the idea is basically uh if you're a customer of a bank or of any entity who does K by C who can give you the green check mark and then this entity like Signum bank or some other bank uh can generate this proof that your capacit and you're basically a green person another red person and then you take this proof which doesn't hold your identity it doesn't reveal who you

are this proof doesn't reveal which bank you are it just reveals hey one institution gave you the green flag and if for example like our lending or whatever uh or Curves thus validate this this uh serial knowledge proof then the smart contract can prove hey I have only cable seat funds in my pool so this would be a model we are exploring now and therefore also maybe we were looking for partners in a defa sector also other institutions also competitors we try to come up with a with a proof system which is privacy preserving which is which is

decentralized and which allows any D5 protocol to get like the the green flag but this is uh let's say an ongoing what we're looking at now so just another way of explaining it uh think of uh uh about this this this red one the fatf think of it like the UN for the anti-money laundering so this institution checks countries checks institutions and gives the green flag to institutions and if you are custom of such institution you get the CK proof of this institution and then if you are a developer and you think and you decide hey I only accept I gonna validate or uh

I'm gonna use this system I can validate zero and launch proofs before the funds enter my pool and if the and when the funds leave my pool they're gonna do the validation then basically anyone any decentralized developer can create a kyc funds which can be used by institution and is safe and also follows automatically the standards also all the the worldwide antimony laundering standards so this this is a proposal which would bring the whole ecosystem forward in our opinion okay that was it any questions uh please press here or you see me out there just come over to me talk to me