INTRODUCING COMPLIANT DEFI

Our goal is to create a massively-adopted, compliant and scalable DeFi ecosystem with comparable market depths across centralized and decentralized markets.

Problem Statement

Traditional financial institutions strictly adhere to KYC, AML and CFT guidelines to ensure their compliance with the set regulations. Blockchain-based institutions fail to do so since they are permissionless, opt-in, trustless p2p networks without a central authority to enforce these requirements.

The sector is plagued by various issues like smart contract errors, user errors, market volatility, and lack of proper insurance on loans and other decentralized financial instruments. There is also the likelihood of complete failure of the DeFi price mechanism that would be catastrophic. The ecosystem is prone to trust issues since participants conduct activities anonymously, which violates compliance requirements imposed on financial institutions.

  1. Large Liquidity Providers [ "LP"s ] are blocked from interacting with the DeFi space because of regulatory constraints and lack of clarity on existing and upcoming regulations which requires them to obtain information on the source and destination of funds.

  2. Similarly, platforms within the Defi space are blocked from accessing deeper capital markets because of the small opportunity space relative to the total potential addressable market assuming regulatory compatibility.

  3. Regulators, having seen no directionality from the Defi ecosystem, are forced to comprehend the space with the lense of (potentially obsolete/irrelevant) loosely-matching, past environments that regulations were applied to.

The Shyft Network Solution:

DeFi can benefit by being compliant as it opens up the ecosystem to mainstream financial institutions, non-technical investors, and mass adoption.

Shyft Network will change that in three ways:

  • Identity Verification,
  • Creation of Compliant Assets,
  • Compliant Decentralized Credit Scoring

Identity Verification

We provide an opt-in framework for gathering, storing, and sharing user identification data on a need-by basis. Our platform acts as a trust anchor and a bridge between users, DeFi platforms, and centralized organizations by providing the required data in a secure manner.

We can facilitate trustless transactions in a decentralized environment by helping the parties to comply with all the regulatory requirements imposed on centralized systems. The platform achieves this by acting as a Trust Anchor that validates the personal data and transaction details by publishing their proof on the blockchain.

Creation of Compliant Assets and Asset Pools

Only verified individuals and organizations will be able to create compliant DeFi assets and asset pools such as loans, liquidity pools, derivatives, governance tokens etc.

The Shyft Network can function as a validator for DeFi participants. Verified players will have their addresses whitelisted, enabling them to participate, create, and have access to compliant assets.

Malicious and suspicious actors will be blacklisted as a precaution to other users, which is aimed at minimizing risk.

Compliant Decentralized Credit Scoring

As part of its continuous development plan for 2021/2022, Shyft Network plans to deploy a blockchain-based credit scoring method that relies on users’ data stored on nodes rather than using their credit scores from the legacy financial system.

This framework will help generate better credit scores for an open and independent DeFi ecosystem. Its goal is to tackle the over-collateralization problem in DeFi, improve access to credit, and open the door for legacy lending institutions’ entry into the ecosystem.

News & Articles

Shyft Network to Build FATF-Compliant Identity Layer for Polkadot - CoinDesk

20/04/06

Binance Joins Blockchain Network for Cross-Industry KYC Data Sharing

20/02/27

FATF Joins BIS in Calling Stablecoins ‘Global Risk,’ Citing Money Laundering Concerns

19/10/18

Bermuda Premier David Burt On Stablecoins, Crypto, Blockchain ID, Libra, Big Tech, And Privacy

19/10/17

Bermuda Starts Development of a Blockchain-Based National ID System

19/10/16

Shyft Network: The Next 12 Months

19/09/06

CipherTrace and Shyft Partner to Address the New FATF Virtual Currency Travel Rule

19/07/02

CipherTrace, Shyft Unveil ID Protecting Solution to FATF Crypto Guidance

19/07/02

Partnership series: Harmony X Shyft Network

19/07/02

G20 Gives Official Support to FATF Crypto-Regulation Guidelines

19/07/01