CSSF white paper on DLT & Blockchain
08 March 2022
CSSF, the financial regulator in Luxembourg published a white paper on Distributed Ledger Technologies (DLT) & Blockchain - Technological Risks and Recommendations in January 2022. The aim of the paper is to provide in depth information about the due diligence process related to the use of a DLT.
The CSSF emphasized its neutrality towards the usage of digital technologies. The regulator states that innovative technologies such as DLT can have significant benefits within the financial sector. Nevertheless, it is essential that institutions meet prudential and regulatory requirements when using DLT.
According to the CSSF, the DLT has a disruptive potential and can revolutionize the financial sector. Among others, the potential in the area of KYC and counterparty or customer identification is highlighted by many professionals.
Within the white paper, the financial regulator presents a Use Case for the implementation of DLT in the area of KYC stating that customer identification checks could be performed by trusted entities which can provide a verified status of customers' digital identity. After the conducted identity checks, the verified digital identity can be shared among various third parties. This scenario would prevent the duplication of data collection. Within this context, the DLT can be used to confirm an identity claim through cryptographic proof.
The white paper proves that the potential of digital technologies in the financial sector can be beneficial for the stakeholders. Nevertheless, it is also relevant to consider the risks which are accompanied with these technologies.
CURENTIS Luxembourg GmbH is one of the first movers regarding the usage of digital technologies for KYC and AML purposes. Our software "KYCMore" which we have developed over the past years show the potential for automatization in the KYC due diligence. However, we are also aware of potential mistakes which is always accompanied by the usage of a software. Therefore, our experienced consultants always perform a manual quality check to make sure that our clients get the best quality possible. Visit our website(https://curentis.com/kyc-luxembourg/) to get further information.
