How Decentralized Identity Can Address the Double KYC Challenge

How decentralized identity could solve the double KYC problem KYC, AML, Web3

Summary:
Identity verification is essential for both users and businesses in the finance and crypto sectors, but it often involves repetitive and frustrating processes. Connect by Persona offers a decentralized approach to identity management that allows companies to effectively reuse verified data while maintaining user privacy and compliance with regulations. This innovation seeks to reduce the friction of double Know Your Customer (KYC) checks, enhancing the overall user experience.

Key Takeaways

Decentralization Enhances Control: Connect by Persona enables organizations to create user-controlled, consent-based identity networks.
User Ownership of Data: Users can decide when and where their verified identity information is shared, improving their experience.
Regulatory Alignment: The platform complies with new regulatory standards while fostering trust in the data exchange process.
Cross-Industry Applicability: Connect aims to unify identity verification across crypto, fintech, and traditional finance.

The Problem with Traditional Identity Verification

Identity verification has become a necessity, yet a cumbersome process for users and companies within finance and cryptocurrency. Frequently, the same customer needs to submit identical documents such as ID, selfies, and proof of address multiple times, particularly in applications that offer integrated services. These repetitive KYC checks, intended to combat fraud, are often cited as significant barriers in the industry.

This repetitive process leads to a notable percentage of users abandoning the KYC process, with data indicating that 25% to 35% of users drop out at the ID and selfie stage. Meanwhile, regulators are confronted with fragmented systems that result in gaps in their crucial data. As the stakes grow due to increasing fraud risks and stricter AML regulations, institutions find it increasingly challenging to provide a positive user experience while ensuring compliance.

Data on user abandonment during KYC process

Introducing Connect: A New Way to Share Verified Identity Data

Connect, a platform that revolutionizes identity sharing by making it secure, compliant, and user-friendly, aims to tackle the infamous “double KYC” issue. Developed by Persona, a San Francisco-based company specializing in identity verification tools, Connect allows businesses to create their own networks for sharing verified identity and business data based on user consent.

With Connect, users maintain ownership of their personal information, determining where and when it can be used again. This approach not only streamlines onboarding processes for businesses but also fulfills regulatory requirements, eliminating the need for redundant checks.

Decentralized Identity: A Trustworthy Solution

Connect takes a decentralized approach, which contrasts with traditional consortium models that centralize identity data sharing. This innovative system allows organizations to create and manage their own data-sharing networks, granting them the power to decide what information to share, when to verify it, and how to manage access to records.

Through Persona’s Dashboard and application programming interfaces (APIs), companies can standardize these data exchanges while keeping the setup efficient, thus avoiding lengthy compliance delays typical in such projects.

By allowing each organization to own and operate its network, Connect ensures data sovereignty. Users can choose when to give their consent while businesses uphold their compliance protocols. This interweaving of privacy and interoperability helps streamline the user experience.

Connect's trusted data sharing model

Simplifying Onboarding in the Crypto Space

Eliminating repetitive checks simplifies onboarding, making it more accessible for users. It’s worth noting that the crypto sector was one of the first to experiment with this model. Pioneers like Coinflow are preparing to integrate Connect to expedite verification processes without compromising AML standards.

The early success of these pilot projects in the crypto space has paved the way for a wider adoption of shared identity verification standards. Regulatory bodies are also advocating for improved identity data sharing. The 2025 guidance from FinCEN, which encourages financial entities to share verified identity data securely and transparently, marks a significant movement in this direction. Connect adheres to both technical and legal requirements of evolving standards without diminishing user trust.

Bridging the Gap Between Crypto, Fintech, and Traditional Finance

Persona plans to unveil Connect at Money20/20 USA, which will be held in Las Vegas from October 27–30, 2025. The beta program already encompasses leading crypto infrastructure providers, with early access features such as fraud signal sharing currently in development.

In addition to crypto applications, Persona aims to bring its capabilities to mainstream finance and fintech, finally aligning the historically separated banking and payment systems. Over time, Connect aspires to create a universal framework for compliant data reuse, forming the foundation for the next generation of digital identity.

This vision transforms how identity functions in a connected era. By advocating for smarter connections rather than solely focusing on stringent barriers, Connect ensures that users carry their verified identities seamlessly across exchanges, wallets, and other platforms without complications.

Learn more about Connect.