Binance, the world’s largest cryptocurrency exchange, has taken a crack at one of the hardest problems in the industry – on-chain identity – by launching the Binance Account Bound Token (BABT).
The Binance Account Bound Token (BABT) offers users that pass Binance’s Know-Your-Customer (KYC) procedure, a token that proves the process has been successfully completed.
Users can then export the token across crypto and decentralized finance (DeFi) tools and protocols, including mixers.
BABTs are a type of Soulbound Token (SBT), which was an idea first proposed by Ethereum’s creator Vitalik Buterin. As pitched by Buterin, SBTs are non-transferable tokens that represent users’ identity and achievements in the Web3 ecosystem.
BABTs have three key properties: They are non-transferable between individuals, they can’t be transferred between one person’s addresses, and can be revoked by the issuer, but minted again within 72 hours.
Binance in November had to pay the U.S. government a $4.3 billion fine for breaking the country’s anti-money laundering laws.
BABTs show the firm is committed to working with lawmakers to enforce KYC/AML, but that it is doing so in a way that incorporates blockchain technology. .
Not Everyone Is Convinced
Some users are wary of the feasibility of BABTs.
“This assumes that addresses are 1 to 1 with the person KYC’d and not shared or compromised,” wrote James McCall on X, who predicts that “this will just make a market for these accounts.”
This assumes that addresses are 1 to 1 with the person ky'd and not shared and/or compromised. This will just make a market for these accounts, just like smurfs that bought cold medicine, they will set forth and pass through the porous barrier protected by math.
— James McCall (@mccallios) July 19, 2024
Zack Burks, founder of Mintable, reckons the idea won’t work for multiple reasons. He pointed to the Financial Action Task Force (FAFT), AML requirements, jurisdictional differences, and the ability to sell private keys or wallets with a BABT.
“While this is cool, and good marketing, sadly, only binance partners will take part, and ultimately if regulators come knocking, those partners will be at fault for using this,” he wrote.
It won't work for multiple reasons. FAFT, AML requirements, jurisdictional differences, ability to sell private keys/wallets with the SBT.
I made the first SBT token to serve a court order to an anon hacker and learned a lot during the process.
While this is cool, and good…
— Zach Burks (@ZachSpaded) July 19, 2024
Other companies might be looking to see how Binance’s innovation works out for them, and if this can provide a more crypto-native way to begin bridging DeFi protocols and centralized platforms.
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