Is Stripe making DeFi more accessible: KYC to hinder growth?

Sahana Kiran
Source – Unsplash

Decentralization has been the long-standing ethos of the crypto-verse. However, the need for centralization soon crept in forcing platforms to operate in such a manner. Therefore, a whole new space called decentralized finance or DeFi came to be. Now, payments firm, Stripe was making DeFi more accessible to the masses.

In a recent blog post, Stripe announced that it would carry out fiat-to-crypto payments for firms across the globe. Customers will be able to immediately buy cryptocurrencies in Web3 apps with the help of the product, which is a widget that can be customized and easily integrated into a decentralized exchange [DEX], non-fungible token [NFT] platform, wallet, or decentralized app [dapp].

The Solana [SOL] network is certainly relevant here as 11 of the firm’s 16 projects were formulated on this network.

In addition to this, Stripe pointed out that it manages know-your-customer [KYC], payments, fraud, and compliance challenges and provides configurable on-ramping services.

While this would certainly make DeFi more accessible to the community, the KYC part of it did not sit well with many.

DeFi and KYC, a bad match?

Several in the community pointed out that a “real DEX” would not require KYC. This subject is often frowned upon. As mentioned earlier, the DeFi space is the only decentralized wing of the entire crypto market. With KYC in place, platforms are likely to entail details of investors.

This, however, has also been a bane for the market. The lack of oversight in the market has caused hackers to thrive in this space. Over the last couple of years, the DeFi space has been subject to a plethora of hacks resulting in the loss of billions. Over $3 billion have been lost in 2022 alone.

Therefore, the need for KYC is often highlighted. But the community certainly thinks otherwise. Back in October 2021, the Financial Action Task Force [FATF] identified DeFi under virtual asset service providers [VASP]. This would make the space subject to regulation.

While this has been on the down low for a while, with DeFi becoming more mainstream, KYC is likely to be pertinent in the space. But the real question is if DeFi and regulations would be able to co-exist.