Zero-KYC solution for scam-free crypto transfers

A Reddit user, ShadowOfHarbringer, has shared a draft proposal for a “Zero-KYC Assurance Mechanism for Fiduciary Money Transfer” (ZKAM-FMT). This proposal helps prevent man-in-the-middle (MitM) financial scams in peer-to-peer (P2P) crypto transactions.

ZKAM-FMT aims to secure transactions without the need for Know Your Customer (KYC) procedures, which many users find intrusive and cumbersome when it comes to safeguarding their privacy.

Privacy-first protection against MitM scams

In a common “man-in-the-middle” scam, a fraudster intercepts a transaction between genuine parties. The scammer tricks the buyer into sending money to the wrong account, thinking they’re paying the crypto seller. Meanwhile, the seller, unaware of the fraud, releases the funds to the scammer, leaving the buyer empty-handed, and the seller could face legal trouble.

The ZKAM-FMT solution proposes adding a built-in browser to P2P market apps. This browser checks transaction details like the amount, transfer title, and account number. Additionally, it verifies the information without saving any sensitive user data or interacting with bank systems, ensuring that funds are managed correctly while addressing privacy concerns.

Integration issues in crypto scam prevention

The Reddit user’s idea for preventing scams is interesting, but there are some hurdles to overcome. A major issue is how to integrate it with banking websites smoothly. This could be tricky due to frequent updates and the setup of these platforms.

The Reddit user highlights that the main problem with the proposal isn’t the surveillance aspect but rather that it fails to account for the fact that younger people often don’t use bank websites for transfers. In an interview on Sept. 1, CEO of Independent Reserve, Adrian Przelozny, explained that scammers target people over 65 more often.

Moreover, he pointed out that when 80-year-olds withdraw cryptocurrency, they are more likely to receive scam calls because they tend to fall victim to these frauds more easily. However, in the UK, younger people are at a higher risk of being scammed, according to a Local Government Association report. The bank found that those aged 25-34 make up a quarter of all crypto scam victims.