Linking Identities to the Blockchain
Updated: Mar 4, 2020
How TokenSoft Connects Real-World Identities with Blockchain-Based Assets
by Mason Borda, CEO, TokenSoft
We’ve been receiving a lot of questions about how exactly our identities support works. This process involves several components: our banking compliance engine, our securities compliance engine, and a secure blockchain interface used to manage the link.
Banking Compliance Engine
A common question is if we “do KYC?” This is a complicated question. Anyone can hook up a KYC/AML API, but there is a host of relevant regulations that must be complied with and these regulations often evolve and change over time. KYC procedures are generally consistent for most clients although different treatment does apply in certain cases. The TokenSoft process requires issuers to process investors through our banking compliance engine.
Relevant regulations in this step include:
However, these regulations are subject to change. For example:
February 2018: FINMA issued ICO Regulations for Asset Tokens
May 2018: FINCEN via Bank Secrecy Act with the CDD Final Rule (enhanced business KYC for beneficial owners)
The TokenSoft team not only helps enterprises and institutions comply with the applicable regulations at the time of the initial issuance, but we also help our clients’ processes and technologies evolve with changes in regulations.
Securities Compliance Engine
(only applies to issuers of securities)
While banking laws tend to be fairly consistent, securities laws vary significantly throughout the world and are generally more complex. When an issuer decides to offer a digital security, legal counsel usually will suggest that the issuer comply with local regulations in each jurisdiction where the security is offered. This can be very complex in an Internet-based offering.
TokenSoft’s securities compliance engine uniquely treats each user based on their jurisdiction and amongst other factors, whether they are an individual or particular type of entity. TokenSoft works with you and your team to define these requirements up front to ensure your offering is compliant.
Blockchain Address Link
Once the user is approved to make purchases, our platform collects the user’s blockchain address.
Next, comes the linking of the address to their identity.
TokenSoft’s Platform uses proprietary tools to verify these addresses regardless of what blockchain is involved. Finally, the most important step is registering the blockchain addresses as “authenticated” for the holding and transferring the digital asset.
For public blockchains, we developed Knox Wallet, the world’s first Ethereum cold-storage multi-signature wallet, to assist with the registration of these addresses in a secure manner. Today, most smart contract providers do this through insecure means with a single signature hot wallet. We use the ERC-1404 standard to register these identities for tokenized assets; the standard may vary based on the needs of our clients. You can read more in this article.
For private blockchains, these procedures vary. The identity link may be through an API with the issuing institution, or it may be directly through an RPC-Interface that is exposed to TokenSoft. The general procedures remain the same.
TokenSoft is known for its ability to handle a large number of purchasers in international offerings.
Our platform has seen over 100,000+ users over our history. Our banking compliance engine has processed 28,000 users for a single, global offering just a few days. Our securities compliance engine processed 6,000 for a single issuer, and our blockchain address link connected 28,000 over a few days.
Verifying identities and linking them to the blockchain are core components of our investor onboarding procedures. If you have questions about these processes or need help with a digital security offering, contact us at tokensoft.io. We are happy to chat.