Know-Your-Customer (KYC) Requirements for Initial Coin Offerings

Artikel

Blockchain technology is often proposed as an infrastructure for decentralized Know-Your-Customer (KYC) verification, i.e., a process determining whether a customer is eligible for a given transaction. The benefit of using blockchain technology lies in the expected compliance costs reduction for companies by automatically enforcing KYC-requirements, whose results are accessible by multiple financial institutions. While information systems researchers have proposed conceptual models and prototypes of blockchain-based KYC-systems, they do not yet consider severe penalties that are applicable to companies if KYC-requirements are not met. Hence, if the legal requirements for KYC-processes cannot be met, these systems are not applicable. The paper uses an objective-centered design science research approach to develop a blockchain-based KYC-system for the conduct of ICOs that is compliant-by-design. To this end, the authors first identify existing KYC-requirements and define corresponding system design objectives that are used to develop a KYC-system that automatically enforces KYC-regulations, thereby preventing money laundering and other forms of identity fraud. Second, the authors contribute to the literature by providing a blueprint for compliant-by-design blockchain-based KYC-systems, in the paper, integrated into the investment flow of an ICO. Third, the authors propose a KYC-system that is applicable in the real world, by making – due to legal certainty – KYC-processes cost-effective, i.e., the proposed blockchain-based KYC-system expectably reduces compliance costs for customers and financial organizations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Business & Information Systems Engineering ; ISSN: 1867-0202 ; Volume: 63 ; Year: 2020 ; Issue: 5 ; Pages: 551-567 ; Wiesbaden: Springer Fachmedien Wiesbaden

Classification and Topics

• Classification: Allgemeines, Wissenschaft
• Subject: Blockchain ; Distributed ledger ; Know-your-customer ; Anti-money-laundering ; Initial coin offering ; Compliance-by-design ; Design science research

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ostern, Nadine Kathrin ; Riedel, Johannes
• Event: Veröffentlichung
• (who): Springer Fachmedien Wiesbaden
• (where): Wiesbaden
• (when): 2020

Further information

• DOI: doi:10.1007/s12599-020-00677-6
• Last update: 10.03.2025, 11:42 AM CET