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What Role Do Digital Identity Solutions Play in Ensuring Smart Contracts Meet KYC/AML Regulations?

Digital identity solutions provide verifiable on-chain credentials so smart contracts can restrict access to KYC-approved users.
Greeks.Live05.11.25

What Role Do Digital Identity Solutions Play in Ensuring Smart Contracts Meet KYC/AML Regulations?

Digital identity solutions allow individuals to prove their identity in a verifiable, secure, and privacy-preserving way on the blockchain. These solutions can issue "soulbound" tokens or verifiable credentials to users who have completed off-chain KYC/AML checks.

Smart contracts can then be programmed to only interact with addresses that hold these specific credentials, effectively creating permissioned pools for regulated activities like securities trading. This allows financial applications to comply with regulations without holding sensitive personal data directly on-chain, balancing transparency with privacy and compliance.

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