European Union

G7 to collaborate on tighter crypto regulation: Report

Leaders from Japan, the United States, the United Kingdom, Canada, France, Germany and the European Union are expected to outline a global cooperative strategy for digital assets in May.

The next G7 meeting might bring a push from the seven biggest democracies for tougher regulations on cryptocurrencies around the world, Kyoto news agency reported on March 25.

Together, leaders from Japan, the United States, the United Kingdom, Canada, France, Germany, and the European Union will outline a cooperative strategy to increase crypto transparency and enhance consumer protections, as well as address potential risks to the global financial system, officials told Kyoto. This year’s summit is set to happen in Hiroshima in May.

Among G7 members, Japan already regulates cryptocurrencies, while the European Union’s Markets in Crypto-Assets (MiCA) regulation is set to go into effect in 2024. The United Kingdom is gradually developing its crypto framework, with a special category for crypto assets on tax forms recently introduced and plans for a digital pound in the works.

Related: The limitations of the EU’s new cryptocurrency regulations

Canada treats digital assets as securities and the United States currently applies existing financial regulations to crypto, with some anticipating a crypto regulatory framework from lawmakers in the coming months.

Parallel efforts toward standards for digital assets are being made by the Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS), the group of the 20 biggest economies of the world — collectively known as G20 — announced in February during a meeting in Bengaluru, India.

India’s finance minister, Nirmala Sitharaman, during FMCBG meeting in Bengaluru. Source: Ministry of Finance

Recommendations on the regulation, supervision and oversight of global stablecoins, crypto assets activities and markets are scheduled to be delivered by July and September. It is unclear, however, what the overall tone of the recommendations will be.

For instance, in February the IMF released an action plan on crypto assets, urging countries to abolish legal tender status for cryptocurrencies. The IMF opposition to crypto as legal tender is well known, especially since El Salvador adopted Bitcoin as its official currency in September 2021. The fund, however, has been advocating for countries to adopt greater crypto regulation, while it’s working on an interoperable central bank digital currency platform to connect multiple global CBDCs and enable cross-border transactions.

Magazine: Best and worst countries for crypto taxes — plus crypto tax tips

‘US has left a vacuum that other countries are eager to fill’: Coinbase

While the U.S. government opts for “regulation by enforcement,” other countries are fostering “vibrant” crypto ecosystems due to progressive regulation, argues Coinbase’s Daniel Seifert.

With Coinbase seemingly on the verge of a court battle with the Securities and Exchange Commission (SEC), the firm has emphasized that the U.S. government’s hawkish approach to crypto regulation has “left a vacuum that other countries are eager to fill.’

The SEC issued Coinbase a wells notice on March 22 outlining that SEC staff had recommended the agency take enforcement action over “possible violations of securities laws” concerning some of the firm’s asset listings, staking services and Coinbase Wallet.

In a March 23 blog post titled Europe is winning. Will the US catch up? Daniel Seifert, Coinbase’s Vice President and Regional Managing Director in Europe, stressed that the U.S.’s “regulatory approach to crypto has been marked by regulation by enforcement,” despite industry-wide calls for “comprehensive crypto regulation.”

“This approach has created an environment of uncertainty and instability in the crypto industry,” he wrote.

As such, Seifert argued that the U.S. is losing its status as the leading hub of the crypto sector, while France, the U.K. and the European Union, are now building “vibrant” ecosystems due to their friendlier approach to crypto regulation.

“The US has left a vacuum that other countries are eager to fill,” he wrote, adding: “we are proudly an American company. It’s hard to sit by and watch the US squander the opportunity it has been given.”

In particular, Seifert highlighted the significance of the Blockchain Week event being hosted at the Louvre in Paris this month. He also pointed to the U.K.’s recent push to become a crypto hub, and the European Union’s Markets in Crypto-Assets (MiCA) regulation that is slated to come into effect in 2024.

“This year it’s being held in a private space at the Louvre, arguably the greatest national treasure in France and one of the world’s most respected museums,” he said, adding:

“To me this is a clear signal: France is rapidly recognizing the opportunity that crypto presents and is offering it space to flourish. The broader EU, the UK, UAE, Hong Kong, Singapore, Australia, and Japan are all following suit.”

The MiCA legislation has been in development for two years, and aims to establish a “harmonized set of rules for crypto-assets and related activities and services.”

Related: Cathie Wood’s ARK loading up on Coinbase shares again, buying $18M

It is generally expected to be a positive move for the European cryptocurrency ecosystem, as it will offer clear rules and guidelines for the sector.

“Already we are seeing that Europe now matches the US in its share of crypto developers ( 29% apiece globally). The US used to lead the charge with 40%,” he said, adding that:

“This level of growth does not happen by chance. Concerted efforts have to be made, such as developing a regulatory framework that will provide clarity and stability for businesses operating in the space.”

In a lengthy March 23 Twitter thread, the Crypto Council for Innovation also highlighted similar points to Seifert, noting that “crypto is global, and nobody is waiting around for the US to land the plane.”

The thread explored positive developments across the globe, including examples such as the National Australia Bank’s work with non-USD pegged stablecoins, Hong Kong’s efforts to become a digital asset hub, and the Canadian Securities Administration recently imposing “enhanced investor protection commitments” on domestic crypto exchanges.

‘US has left a vacuum that other countries are eager to fill’: Coinbase

While the U.S. government opts for “regulation by enforcement,” other countries are fostering “vibrant” crypto ecosystems due to progressive regulation, argues Coinbase’s Daniel Seifert.

With Coinbase seemingly on the verge of a court battle with the United States Securities and Exchange Commission (SEC), the firm has emphasized that the U.S. government’s hawkish approach to crypto regulation has “left a vacuum that other countries are eager to fill.“

The SEC issued Coinbase a Wells notice on March 22 outlining that SEC staff had recommended the agency take enforcement action over “possible violations of securities laws” concerning some of the firm’s asset listings, staking services and Coinbase Wallet.

In a March 23 blog post titled, “Europe is winning. Will the US catch up?” Daniel Seifert, Coinbase’s vice president and regional managing director in Europe, stressed that the U.S.’s “regulatory approach to crypto has been marked by regulation by enforcement,” despite industry-wide calls for “comprehensive crypto regulation.”

“This approach has created an environment of uncertainty and instability in the crypto industry,” he wrote.

As such, Seifert argued that the U.S. is losing its status as the leading hub of the crypto sector, while France, the U.K. and the European Union are now building “vibrant” ecosystems due to their friendlier approach to crypto regulation.

“The US has left a vacuum that other countries are eager to fill,” he wrote, adding: “we are proudly an American company. It’s hard to sit by and watch the US squander the opportunity it has been given.”

In particular, Seifert highlighted the significance of Paris Blockchain Week hosted at the Louvre this month. He also pointed to the U.K.’s recent push to become a crypto hub, and the European Union’s Markets in Crypto-Assets (MiCA) regulation, slated to come into effect in 2024.

“This year it’s being held in a private space at the Louvre, arguably the greatest national treasure in France and one of the world’s most respected museums,” he said, adding:

“To me this is a clear signal: France is rapidly recognizing the opportunity that crypto presents and is offering it space to flourish. The broader EU, the UK, UAE, Hong Kong, Singapore, Australia, and Japan are all following suit.”

The MiCA legislation has been in development for two years, and aims to establish a “harmonized set of rules for crypto-assets and related activities and services.”

Related: Cathie Wood’s ARK loading up on Coinbase shares again, buying $18M

It is generally expected to be a positive move for the European cryptocurrency ecosystem, as it will offer clear rules and guidelines for the sector.

“Already we are seeing that Europe now matches the US in its share of crypto developers (29% apiece globally). The US used to lead the charge with 40%,” he said, adding that:

“This level of growth does not happen by chance. Concerted efforts have to be made, such as developing a regulatory framework that will provide clarity and stability for businesses operating in the space.”

In a lengthy March 23 Twitter thread, the Crypto Council for Innovation also highlighted similar points to Seifert, commenting that “crypto is global, and nobody is waiting around for the US to land the plane.”

The thread explored positive developments globally, including examples such as the National Australia Bank’s work with non-U.S. dollar-pegged stablecoins, Hong Kong’s efforts to become a digital asset hub, and the Canadian Securities Administration recently imposing “enhanced investor protection commitments” on domestic crypto exchanges.

‘If a government bans drugs, it should also ban crypto’ — Belgium’s former finance minister

Members of the European Parliament have been discussing the impact of the failure of Silicon Valley Bank, Signature Bank and Silvergate Bank on markets in their jurisdictions.

Johan Van Overtveldt, a member of the European Parliament and the former Minister of Finance of Belgium, has called for a “strict ban” on crypto as a result of the current banking crisis.

In a March 17 tweet, Overtveldt suggested lawmakers should consider banning cryptocurrencies as a “lesson” from the collapses of Silicon Valley Bank, Signature Bank and Silvergate Bank in the United States, referring to digital assets as “speculative poison.” Members of the European Parliament have been discussing the impact of the failure of these banks on markets in its jurisdiction.

“If a government bans drugs, it should also ban cryptos,” said Overtveldt.

A finance minister of Belgium from 2014 to 2018, Overtveldt became a European Parliament member in 2019 and part of its Committee on Economic and Monetary Affairs. In October 2022, the committee approved the Markets in Crypto-Assets, or MiCA, framework, expected to go into effect starting in 2024.

Related: The limitations of the EU’s new cryptocurrency regulations

As the impact of the banking crisis unfolds, many U.S. lawmakers have also claimed financial institutions’ ties to crypto firms were partly responsible for their collapse, starting with Silvergate’s voluntary liquidation on March 8. Silicon Valley Bank followed on March 10 amid a bank run, and New York regulators took control of Signature on March 12. SVB Financial Group has since filed for Chapter 11 bankruptcy.

European Parliament votes to form final law on EU digital wallet

Introduced in 2021, the European Digital Identity framework aims to enable and protect the digital identity of EU citizens.

European lawmakers are moving forward with the introduction of a European Union-wide digital wallet by passing a plenary vote on moving the initiative to interinstitutional negotiations.

The European Parliament on March 15 voted in favor of negotiating a mandate for talks with the EU member states on the revision of the new European Digital Identity (eID) framework, according to an official announcement. The plenary vote resulted in 418 votes in favor and 103 votes against the initiative, with 24 parliament members abstaining from the vote.

Following the plenary’s endorsement, the EU council is now ready to start the discussions on the final form of the legislation immediately, the lawmakers said. Parliament’s position during the negotiations will be based on the amendments adopted in the Industry, Research and Energy Committee (ITRE) in February, the announcement notes.

As previously reported, ITRE included the standard of zero-knowledge proofs in its eID amendments, intending to allow EU citizens to fully control their identity data.

“The scheme would allow citizens to identify and authenticate themselves online — via a European digital identity wallet — without having to resort to commercial providers, as is the case today — a practice that has raised trust, security and privacy concerns,” the European Parliament said.

Related: Euro Parliament approves Data Act that requires kill switches on smart contracts

Introduced in June 2021, the eID legislative proposal aims to create a “European Digital Identity” and a dedicated digital wallet for citizens and businesses in the EU. The “European Digital Identity Wallet,” also known as EDIW, aims to allow people and companies in the EU to store identity data like names and addresses as well as digitized documents, including data on bank accounts, birth certificates, diplomas and other documents for cross-border use.

Euro Parliament approves Data Act that requires kill switches on smart contracts

The act would encourage data sharing, but it imposes requirements for smart contracts used in this setting that have alarmed members of the crypto community.

The European Parliament passed the Data Act on March 14. The comprehensive bill was intended to “boost innovation by removing barriers obstructing access to industrial data.” Among its provisions is an article that would require smart contracts to be alterable. 

The legislation established rules for fairly sharing data generated by “connected products or related services,” such as the Internet of Things and “industrial machines.” Eighty percent of industrial data generated is never used, the European Parliament noted in a statement, and this act would encourage greater use of those resources to train algorithms and lower prices for device repairs.

The act contains provisions to protect trade secrets and avoid unlawful data transfers, and it set requirements for the smart contracts of parties offering sharable data, including “safe termination and interruption”:

“The smart contract shall include internal functions which can reset or instruct the contract to stop or interrupt the operation. […] Especially, it should be assessed under which conditions non-consensual termination or interruption should be permissible.”

The act also granted smart contracts equal protection when compared with other forms of contract.

Experts identified a number of issues with the legislation. OpenZeppelin head of solutions architecture Michael Lewellen commented in a statement provided to Cointelegraph:

“Including a kill switch undermines immutability guarantees and introduces a point of failure since someone needs to govern the use of such a kill switch. […] Many smart contracts such as Uniswap do not have this kill switch ability.”

Related: FTX proves MiCA should be passed fast, officials tell European Parliament committee

Professor Thibault Schrepel of the Vrije Universiteit Amsterdam said in a tweet that the act “endangers smart contracts to an extent that no one can predict,” and pointed out sources of legal uncertainty in the act. In particular, he found that it did not specify who could stop or interrupt a smart contract.

The bill was passed by a margin of 500-23, with 110 abstentions. Parliament members will now negotiate the final form of the law with the European Council and individual member countries of the European Union.

European Commission to ensure ‘healthy competition’ in the metaverse

Margrethe Vestager, the competition commissioner, stressed the need to anticipate and plan for changes in technological advancements.

Considering the regulatory struggle to keep up with ever-evolving innovations, Margrethe Vestager, the executive vice president of the European Commission for a Europe fit for the digital age, and commissioner for competition since 2014, recommended a headstart into brainstorming implications of technologies such as the metaverse and ChatGPT.

While speaking about competition policy at the Keystone Conference, Vestager highlighted how the digital transition and the shift to a digital economy had brought risks and opportunities for everyone. She believes that legislation lags behind technological advancements, adding:

“We have certainly not been too quick to act — and this can be an important lesson for us in the future.”

While the enforcement and legislative process will continue to stay a step behind tech innovations, Vestager stressed the need to anticipate and plan for such changes. She stated:

“For example, it is already time for us to start asking what healthy competition should look like in the metaverse or how something like ChatGPT may change the equation.”

The commissioner also revealed that the European Commission would enforce antitrust investigations from May 2023 aimed at the Facebook marketplace and how Meta uses ads-related data from rivals.

Related: The limitations of the EU’s new cryptocurrency regulations

Feb. 15 marked the launch of the European Blockchain Regulatory Sandbox, which provides a space for regulatory dialog for 20 projects per year through to2026.

On the other end of the spectrum, European Union lawmakers are in talks about using zero-knowledge proofs for digital IDs. Cointelegraph’s report on the matter highlighted:

“The new eID would allow citizens to identify and authenticate themselves online (via a European digital identity wallet) without having to resort to commercial providers, as is the case today – a practice that raised trust, security and privacy concerns.”

Zero-knowledge proofs have recently been at the center of researchers’ attention as a way to ensure regulatory compliance and privacy in digital currencies.

Blockchain projects face ‘lack of appetite’ from US regulators, says Austin Federa

The Solana Foundation’s head of strategy said he had heard from projects facing “pretty draconian” rules in the European Union related to shifting to non-custodial wallets.

Austin Federa, head of strategy at the Solana Foundation, spoke to Cointelegraph at the ETHDenver conference on the network’s outages, the impact of regulation on other projects, and the launch of its mobile device.

Federa said the New York Department of Financial Services — or NYDFS, one of the state regulators responsible for licensing crypto firms — was essentially setting up roadblocks for many projects looking to issue stablecoins or similar blockchain services. He added that Solana had heard from projects facing “pretty draconian” rules in the European Union related to shifting to non-custodial wallets.

“DFS has not certified Solana yet,” said Federa told Cointelegraph on March 1. “We’re trying to get it underway, but I think that what we’ve seen is a lack of appetite from DFS anywhere. If a new entrant — let’s say, a large financial services Web2 company — feels like they want to start issuing a stablecoin, they feel like they need DFS approval in order to do something like that.”

In response to the recent slowdown in block production, which resulted in a Solana network restart, Federa said there was “no specific root cause analysis” reported by the team’s engineers. He added that there may have been “something about the interaction” between the network’s version 1.13 and 1.14 or in the latest attempt to upgrade that forced validators to restart.

“The thing is about 1.14, it was running on testnet for months before it was actually migrated over to maintenance,” said Federa. “So, what that really sort of highlighted is that the testing infrastructure for releases isn’t quite as robust as it needs to be right now because it wasn’t like this was just something that was just, you know, thrown onto mainnet like willy-nilly. It’s just the testing didn’t catch what this error was.”

Federa said that Solana’s approach has been to develop a faster ecosystem in a matter of months, as opposed to networks like Ethereum, which had taken years. He added that many projects were hurting for venture capital funds amid the bear market and negative press coverage associated with crypto and blockchain, with stability a major factor in the retention of users.

“One of the risks there is downtime, and so that there’s been a sacrificing of stability to get more stuff out more quickly to help the network grow more quickly.”

The collapse of FTX in November 2022 made ripples affecting Solana’s mobile device ambitions as well. According to Federa, Solana had temporarily scrubbed its “tap to pay” fiat-to-crypto feature without a replacement for FTX — the firm had been expected to facilitate transactions — but planned to launch in “the first or second week of April.”

Related: The state of Solana: Will the layer-1 protocol rise again in 2023?

Many on social media have criticized Solana for its network outages, with various causes including a denial-of-service attack in 2021, congestion from nonfungible token minting bots in May 2022 and a consensus failure in June 2022. The cause of the most recent outage was still unknown at the time of publication, but Solana Labs founder and CEO Anatoly Yakovenko said it was not the result of clogging the network’s on-chain voting system.

The limitations of the EU’s new cryptocurrency regulations

By the time MiCA makes it through the EU, will it be enough to effectively regulate the crypto industry on the continent?

The final vote on the European Union’s much-awaited set of crypto rules, known as the Markets in Crypto Assets (MiCA) regulation, was recently deferred to April 2023. It was not the first delay — previously the European lawmakers rescheduled the procedure from November 2022 to February 2023. 

The setback, however, was caused solely by technical difficulties, and thus, MiCA is still on its way to becoming the first comprehensive pan-European crypto framework. But that will happen only in 2024, whereas during the second half of last year, when the MiCA text had already been mostly written, the industry was shaken with a number of shocks, provoking new headaches for regulators. There’s little doubt that in an industry as dynamic as crypto, the whole of 2023 will bring some new hot topics as well.

Hence, the question is whether MiCA, with its already existing imperfections, could qualify as a truly “comprehensive framework” a year from now. Or, which is more important, will it for an effective set of rules to prevent future failures akin to TerraUSD or FTX?

These questions have certainly appeared in the mind of the president of the European Central Bank, Christine Lagarde. In November 2022, amid the FTX scandal, she claimed “there will have to be a MiCA II, which embraces broader what it aims to regulate and to supervise, and that is very much needed.”

Cointelegraph reached out to a range of industry stakeholders to know their opinions on whether the Markets in Crypto Assets regulation is still enough to enable the proper functioning of the crypto market in Europe.

EU DeFi regulations still a ways off

One main blindspot with regard to the MiCA is decentralized finance (DeFi). The current draft generally lacks any mention of one of the later organizational and technological forms in the crypto space, and it surely could become a problem when MiCA arrives. That certainly drew the attention of Jeffrey Blockinger, general counsel at Quadrata. Speaking to Cointelegraph, Blockinger imagined a scenario for a future crisis: 

“If DeFi protocols disrupt the major centralized exchanges as a result of a broad loss of confidence in their business model, new rules could be proposed to address everything from money laundering to customer protection.”

Bittrex Global CEO Oliver Linch also believes there is a global problem with DeFi regulation and that MiCA won’t make an exception. Linch said that that DeFi is inherently unregulatable and, to some degree, even a low priority for regulators, as the majority of customers engage in crypto mainly through centralized exchanges.

Recent: DeFi security: How trustless bridges can help protect users

However, Linch told Cointelegraph that just because regulators can supervise and engage with centralized exchanges most easily doesn’t mean there isn’t an important role for DeFi to play in the sector.

The lack of a distinct section dedicated to DeFi doesn’t mean it’s impossible to regulate. Speaking to Cointelegraph, Terrance Yang, managing director at Swan Bitcoin, said that DeFi is to some degree transferable to the language of traditional finance, and therefore, regulatable:

“DeFi is just a bunch of derivatives, bonds, loans and equity financing dressed up as something new and innovative.”

The yield-bearing, lending and borrowing of collateralized crypto products are things that investment and commercial banks are interested in and should be regulated similarly, Yang believes. In that way, the suitability requirements as formulated in MiCA can actually be helpful. For instance, DeFi projects may potentially be defined as providing crypto asset services in MiCA’s vocabulary.

Lending and staking

DeFi may be the most notable, but surely not the only limitation of the upcoming MiCA. The EU framework also fails to address the growing sector of crypto lending and staking.

Given the recent failures of the lending giants, such as Celsius, and the rising attention of American regulators to staking operations, EU lawmakers will need to come up with something as well.

“The market collapse in the last year was spurred by poor practices in this space like weak or non-existing risk management and reliance on worthless collateral,” Ernest Lima, partner at XReg Consulting, told Cointelegraph.

Yang noted the particular problem of disbalance in the regulation of lending and staking in the Eropean Union. Ironically, at the moment, it is the crypto market that enjoys an asymmetrical advantage in terms of loose regulation when compared to the traditional banking system in Europe. Legacy commercial or investment banks and even “traditional” fintech companies are overregulated relative to the arguably heavily under-regulated crypto exchanges, crypto lending and staking platforms:

“Either let the free market work with no regulation at all, except maybe for fraud, or make the rules the same for all who offer economically the same product to Europeans.”

Another issue to watch is the nonfungible tokens (NFTs). In August 2022, European Commission Adviser Peter Kerstens revealed that, despite the absence of the definition in MiCA, it will regulate NFTs as cryptocurrencies in general. In practice, this could mean that NFT issuers will be equated to crypto asset service providers and required to submit regular accounts of their activities to the European Securities and Markets Authority at their local governments.

Cause for optimism 

MiCA was largely met with moderate optimism by the crypto industry. Despite a few rigidities in the text, the approach seemed generally reasonable and promising in terms of market legitimization.

With all the tumult in 2022, will the next iteration of the EU crypto framework, a hypothetical “MiCA-2,” be more restrictive or crypto-skeptical? “The further delays MiCA has faced have only highlighted the idle approach taken by the EU to introduce legislation that is needed more now than ever before, particularly given recent market events,” Linch said, claiming the necessity of tighter and swifter scrutiny over the market.

Recent: SEC vs. Kraken: A one-off or opening salvo in an assault on crypto?

Lima also anticipates a closer approach with more issues covered. And it is really important for European lawmakers to pace up with the regulatory updates:

“I expect a more robust approach to be taken in some of the technical standards and guidelines that are currently being worked on and will form part of the MiCA regime. We might also see greater scrutiny by regulators in authorization, approval and supervision, but ‘crypto winter’ will have long since thawed by the time the legislation is revised.”

At the end of the day, one shouldn’t get caught up in the stereotypes about the tardiness of the European Union’s bureaucratic machine.

It is still the EU, and not the United States, where there is at least one large legal document, scheduled to become a law, and the main effect of the MiCA was always much more important symbolically, whereas the urgent issues in crypto could actually be covered by less ambitious legislative or executive acts. It is the mood of these acts, however, that remains crucial — the last time we heard from the EU it decided to oblige the banks storing 1,250% risk weight on their exposure to digital assets.

European Union discusses using zero-knowledge proofs for digital IDs

The proposition to use zero-knowledge proofs was approved by the EU Committee and may become part of the updated legislation.

The European Union is famous for its ambivalent relationship with privacy — on the one hand, it was the first place in the world to apply strict data protection regulations. On the other, its central bank digital currency (CBDC) project lacks the anonymity standards of private cryptocurrencies. 

Nevertheless, last week EU lawmakers made a vital step to embrace privacy in the space of citizens’ digital identities. On Feb. 9, the Industry, Research and Energy Committee included the standard of zero-knowledge proofs in its amendments to the European digital identity framework (eID). The latest update was voted in by 55 votes to 8 in the committee — the draft will now proceed to the trilogue phase of negotiations.

While the latest draft is still not available publicly, the press release specifies that EU citizens would be granted full control of their data, with the option to decide what information to share and with whom:

“The new eID would allow citizens to identify and authenticate themselves online (via a European digital identity wallet) without having to resort to commercial providers, as is the case today – a practice that raised trust, security and privacy concerns.” 

As Jonas Fredriksen, the senior director for EU government affairs at Circle has noted on Twitter: 

“The proposal would facilitate the emergence of new business models and opportunities in the digital economy, as companies develop innovative products and services that rely on zero-knowledge proofs and eID solutions.”

Zero-knowledge proofs have recently been at the center of researchers’ attention as a possible means to ensure regulatory compliance and privacy in digital currencies. 

The joint paper by the San Francisco-based Mina Foundation, operator of the Mina Protocol; German Hauck Aufhäuser Lampe bank; and the Interdisciplinary Centre for Security, Reliability and Trust of the University of Luxembourg showed how exactly the zero proofs could be connected to Europe’s eIDAS electronic identity system.

Related: Polygon tests zero-knowledge rollups, mainnet integration inbound

However, not everyone is convinced by that solution. Writing for Cointelegraph, Balázs Némethi, the CEO of Veri Labs and a co-founder of kycDAO, claimed that when proofs alone are insufficient and personal information sharing between the participants of a transaction is essential, relying only on off-chain solutions is advised.