What do I need to do to ensure my ADA will have legitimate metadata behind it to interact with traditional banking institutions in the future?


#1

Reposting this thread from a Reddit user that asked a good question that didn’t really get answered:

Assuming there will be future regulations governing crypto with respect to KYC: if my binance account has tokens like Monero coming in and out, does that put a question mark on the legitimacy of the ADA acquired on the account? Will a traditional bank look at my portfolio and say, “all of this is infected by your use of anonymous currency” and therefore unable to interact lawfully with them?


#2

This is by far too early and too vague of a question to start even speculating about this. All of this will depend at least on: jurisdiction, bank itself, and specifics of the “future regulations”. This question may only be answered with a reference to a precedent, accompanied by a comment, that past precedents do not guarantee future judicial decisions.

The only proper way, this question could be asked, is: “considering the specific regulation A in country B, will the bank C say D about my ADA?”

And BTW, traditional banks are not limited to decline service only by regulations, afaik. As a private financial institutions (depends on the country) they can rejected anyone’s ADA just cuz they don’t like their face, so maximum that may be logically guessed is that: a specific regulation, in a specific country, will not force a specific bank to decline you, but this does not guarantee that they won’t do it anyways.


#3

lol… nice put… I found that way more funny than it should be… So unexpected…


#4

This is a good question and a genuine concern. I can share my thoughts on it; however, as vantam-subhuman put it, it is too early to have any “knowledge” in this regard.

The banking regulations at present require individual banks to perform KYC - regardless of how many other banks have done that with same person. This is deliberate, not something that was overlooked.

Given that, if a bank where you intend to use ADA knows about your Monero holdings it is obligated to understand what you have been using it for. That is part of the AML (anti money laundering) check. If you are unable to demonstrate that there was no ML, or if the bank is unable to confirm that, then the AML check part of KYC is incomplete and therefore KYC is incomplete.

In that case the bank is most likely going to decline future crypto transactions with you. The consequences to the bank for accepting transactions without KYC are severe. There will be dozens of regulatory fines and the employees involved will receive stiff penalties.

As for metadata attached to ADA transactions; that’s the easy part. I’ve heard Charles mention this in a few talks. This can be done via smart contracts that

  • take all identifying information about the entity that wants to enter the regulated financial market

  • Perform automated checks - how this will be done in unclear to me at present

  • Encrypt the metadata such that only the concerned authorities in the jurisdiction involved can read it

  • Make the transfer to a fiat or ADA account in a bank via some bridge crypto (like Enterprise Cardano or Ripple).