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Why does BTC require ID verification (Why does Bitcoin require holding ID)?

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Why does BTC require ID verification? Why does Bitcoin require ID verification?

Why does BTC require ID verification (Why does Bitcoin require holding ID)?

Why does BTC require ID verification? Why does Bitcoin require ID verification?

Over the past decade, Bitcoin has become increasingly popular due to its anonymity and decentralized nature. As blockchain technology continues to evolve and advance, more people are recognizing the value of Bitcoin. However, there have been instances where individuals have used this technology for illegal activities such as obtaining large sums of money or engaging in criminal activities like drug trafficking. These criminal behaviors have presented significant legal risks for governments worldwide. To address these challenges, a strict system of security management is necessary. Sufficient information is required to determine who owns what assets and which digital currencies they can control.

The US Federal Trade Commission (FTC) is currently investigating cryptocurrency traders for violations of the Bank Secrecy Act (BSA). According to an announcement by the CFTC, the act prohibits offering services to unauthorized individuals.

Despite this, Facebook remains one of the largest payment companies globally but has not been able to connect its financial products with cryptocurrencies. Consequently, it has decided to shut down all its cryptocurrency exchanges. However, when it comes to cryptocurrencies, regulatory bodies are more cautious. With no country implementing robust anti-money laundering regulations for virtual currencies and no fiat currency supporting this practice, Facebook had to abandon its plan to issue stablecoins. Nonetheless, “protecting personal information” seems to be a crucial task for most cryptocurrencies as using Bitcoin for purchases and storage incurs additional costs.

In many respects, user identity security and network security are significant concerns that have garnered continuous attention. On October 15, 2020, Dr. Emin Gün Sirer, a computer science professor at the University College London, presented a new paper describing the significant fraudulent potential of Bitcoin. He mentioned “how to ensure that your Bitcoin is not a tool for scammers” and explained, “Fundamentally, you cannot use your Bitcoin as evidence of someone’s true identity.”

Additionally, research has shown that even a project based on Ethereum can be verified by the sender’s address. For instance, Bitcoin miners can use their Bitcoin to verify if it belongs to a third-party custodian entity and receive corresponding rewards. Alternatively, they can establish themselves as independent companies like BitGo or Blockchain.com. Even major enterprises like Coinbase can use this method to identify customers.

Of course, some suggest not exchanging Bitcoin for another cryptocurrency but sticking to more traditional forms.

Why does Bitcoin require holding ID?

As the price of Bitcoin rises, there may be two underlying reasons. The first reason is a change in people’s attitude towards Bitcoin, while the second reason is due to the “Bitcoin itself” and identity issues.

In the early stages of blockchain technology development, the “ID card” served as an important tool. We can consider it as our own national ID, which allows us to use Bitcoin for transactions while ensuring authenticity. If the government can provide information or data concerning your personal information to protect your privacy, it becomes even more crucial for digital currencies.

Therefore, many people are concerned about why Bitcoin is required. From this perspective, Bitcoin is not equivalent to fiat currency but rather a virtual commodity or service supported by physical assets.

For example, in a country like the United States, with a population of over one billion, less than half of the people hold cryptocurrencies. Hence, many countries are now researching and exploring the issuance of central bank digital currencies (CBDC). However, China has already placed its sovereign credit at risk. What is the role of an “ID card”? The most crucial aspect is that an ID card ensures that any transaction conducted online is valid. However, this situation is not without drawbacks. To prevent criminals from exploiting secret cryptographic means to obtain verifiable funds, cryptographic methods must be relied upon. This requires us not to pretend that all money is real and not to disclose it to others at will. In other words, if you don’t want others to know, you cannot control these illegal activities.

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