The Bank for International Settlements proposes a personal scoring system based on cryptocurrency transaction history.

This system evaluates Tokens related to criminal activities, helping each country establish thresholds for converting cryptocurrencies to fiat without collecting user data.

MAIN CONTENT

  • Proposal for personal scoring based on cryptocurrency transaction history.

  • Tokens related to wallets or protocols suspected of fraud will be rated lower.

  • Maintain the decentralized characteristic, without requiring the collection of personal data.

What is the proposal for personal scoring based on cryptocurrency transaction history?

The Bank for International Settlements (BIS) presents a proposal to evaluate individuals based on their cryptocurrency transfer processes. The goal is to distinguish transactions related to illegal activities for better control over the conversion to fiat.

This aims to reduce the risk of money laundering and illegal activities on the Blockchain platform, while ensuring users retain their right to trade freely without providing personal data.

How does the scoring system affect the control of cryptocurrencies related to crime?

The system will lower the score of Tokens that have been traded through wallets or protocols suspected of criminal activities or money laundering. Regulatory authorities can set score thresholds, above or below which will decide the ability to convert Tokens to fiat.

This approach focuses on preventing illegal activities rather than controlling users, helping to maintain the decentralization and transparency of Blockchain.

The Bank for International Settlements states: “Scoring based on transaction history helps eliminate risks from Tokens related to criminal activities without affecting users' privacy.”

Bank for International Settlements, 15/08/2023

How can countries use this scoring system to monitor cryptocurrencies?

Each country can customize the acceptable score threshold to decide on converting cryptocurrencies to fiat, ensuring control over high-risk Tokens while maintaining the advantages of decentralized Blockchain.

This approach does not require the collection of personal data or hinder legitimate users, contributing to a balance between financial security and trading freedom.

Does the implementation of the scoring system affect user privacy?

The system is designed to maintain the permissionless characteristic of Blockchain, meaning no personal data is collected but based on public on-chain transaction history.

This helps enhance privacy protection while still controlling the risks associated with cryptocurrencies used for illegal activities.

What are the challenges in implementing the historical transaction scoring system?

Some key challenges include accurately defining suspicious wallets or protocols, establishing appropriate score thresholds between control and trading freedom, and ensuring consistent implementation across multiple countries.

Additionally, standardizing the scoring metrics and avoiding negative impacts on legitimate transactions is also an issue that needs to be addressed.

Frequently asked questions

What does the cryptocurrency scoring system rely on to evaluate individuals?

Based on the history of cryptocurrency transfers, especially transactions related to suspicious wallets or protocols commonly used for money laundering.

How will countries leverage this system?

Establish score thresholds to control the conversion of Tokens to fiat, preventing related cryptocurrencies from engaging in illegal activities.

Does the system expose personal information?

No, because no user data is collected, only public transaction history on the Blockchain is used.

Will the system affect the decentralization of Blockchain?

The system is designed to maintain the permissionless nature, not affecting users' right to trade freely.

What are suspicious wallets or protocols?

These are wallets or protocols identified as related to criminal activities or cryptocurrency money laundering through in-depth reports.

Source: https://tintucbitcoin.com/cham-diem-vi-tien-dien-tu-bis/

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