Introduction

The Bank for International Settlements (BIS) recently unveiled an innovative bulletin (No. 111) proposing a risk-based Anti-Money Laundering (AML) compliance framework for cryptoassets. This paradigm-shifting approach leverages blockchain transparency to assign compliance scores to crypto holdings, representing a sophisticated evolution beyond traditional intermediary-dependent systems.

We welcome this regulatory innovation that perfectly aligns with zkMe's pioneering vision for compliant yet privacy-preserving Web3 infrastructure. Our zkKYC solution, built on zero-knowledge proofs and Self-Sovereign Identity principles, provides the technical capabilities that next-generation compliance frameworks demand.

Here's how our cutting-edge zkKYC solution is uniquely positioned to lead the implementation of sophisticated on-chain compliance while maintaining Web3's core values.

The BIS Proposal: Transaction History as Compliance Tool

The BIS proposal introduces two key innovations:

Transparency-Based Assessment: Rather than fighting blockchain's public nature, regulators can leverage transaction histories to assess cryptoasset risk profiles. An "AML compliance score" would evaluate how closely any cryptoasset unit is associated with illicit activity.

Off-Ramp Enforcement: Compliance checks occur when cryptoassets convert to fiat currency at exchanges, payment processors, and banking interfaces. The proposal ranges from permissive (deny-list checking) to stringent (allow-list requirements), with the strongest form requiring all addresses to have undergone KYC compliance checks.

At its most stringent, the proposal suggests using "smart contract functionalities" to block transactions from non-verified addresses—pointing toward comprehensive on-chain compliance verification.

Privacy and User Experience Considerations

While the BIS proposal addresses legitimate compliance needs, it introduces new considerations:

Transaction History Monitoring: Systematic evaluation of cryptoasset "cleanliness" creates detailed financial association records, representing a new approach to financial monitoring that may impact user privacy expectations.

Indirect Taint Risks: Users might unknowingly receive funds with problematic histories. While the BIS acknowledges users "may reasonably claim to have received a tainted token in good faith," this creates potential friction that proactive solutions could address.

Compliance Scope: The proposal explicitly mentions expansion to "taxation and consumer protection," highlighting the need for solutions that can meet diverse regulatory requirements across jurisdictions.

zkKYC: Enabling Privacy-Preserving Compliance

zkMe's revolutionary zkKYC solution provides the perfect technical pathway to implement the BIS vision while addressing user experience and privacy considerations:

Privacy-First Verification: zkKYC enables users to prove compliance attributes—citizenship, age verification, identity document validity—without revealing underlying personal information. This creates verified legitimacy that complements transaction history analysis.

Reusable Verification: Users complete identity verification once and obtain reusable verifiable credentials. Once verified, users can leverage zkKYC credentials across multiple services without repetitive KYC processes, reducing friction while maintaining compliance.

Privacy-Preserving Verification: Users prove specific compliance requirements while keeping other information private—proving citizenship eligibility without revealing personal details, or confirming age majority without disclosing birth dates.

Self-Sovereign Identity: Through a self-sovereign identity framework, zkKYC reduces reliance on centralized databases while providing cryptographically verifiable compliance status. This approach becomes particularly valuable as the industry moves toward wallet-level verification requirements, where cross-chain interoperability and reusable credentials are essential for functional multi-blockchain ecosystems.

zkMe's Comprehensive Approach to Privacy-Preserving Compliance

As the only FATF-compliant, fully decentralized DID provider, zkMe has already processed over 1.7 million verifications across 30+ blockchain networks. Our comprehensive solutions include:

zkKYC - Verify identities without compromising personal data
zkTLS - Provide verifiable proofs of asset data using zero-knowledge TLS
KYT - Monitor blockchain transactions for enhanced security
Token Distribution - Power secure on-chain airdrops
MeID - Ensure personhood & uniqueness of your user base
KYB - Streamline corporate verification for compliant Web3 partnerships

Leading chain ecosystems like Plume Network, Moca Chain, and Mandala Chain have already chosen zkMe as their compliance infrastructure partner. With native integration across Ethereum, Solana, Polygon, and 30+ other chains, zkMe offers the scalability and interoperability that the BIS vision demands.

Industry Implications: The Path to On-Chain Compliance

The BIS proposal confirms a global trend toward wallet-level interoperable KYC requirements for every secondary trade onchain. The bulletin's stringent implementation scenarios suggest we're moving toward a future where stablecoin smart contracts must natively verify wallet ownership, potentially requiring verification of both sending and receiving wallets for each transaction.

This represents a fundamental architectural shift:

Smart Contract Integration: Future DeFi protocols may integrate KYC verification directly into transaction logic, checking wallet compliance before executing transfers.

Technical Infrastructure: Blockchain applications will require robust identity verification systems operating efficiently at the protocol level while maintaining speed and cost effectiveness.

Cross-Chain Requirements: Universal compliance across jurisdictions demands interoperable verification credentials that work seamlessly across different blockchain ecosystems.

Conclusion

The BIS bulletin confirms the global trend toward comprehensive on-chain compliance verification, where wallet-level KYC becomes standard infrastructure. This evolution requires technical solutions that can deliver compliance at blockchain scale while preserving user privacy.

zkKYC provides the technical pathway to implement this vision through interoperable, cross-chain verification credentials that integrate directly with smart contract logic. By enabling wallet-level compliance verification that the BIS proposal envisions, zkKYC helps create the foundation for a compliant yet privacy-respecting on-chain economy.

zkMe is ready to lead this compliance revolution. Our proven technology, extensive ecosystem partnerships, and unwavering commitment to privacy-first solutions make us the ideal partner for businesses preparing for the BIS compliance future.

Ready to future-proof your platform? Contact zkMe today to learn how our zkKYC infrastructure can seamlessly integrate with your systems and ensure compliance with emerging regulations.

About zkMe

⭐ zkMe builds web3 protocols and infrastructure for compliant, self-sovereign, and private verification of user credentials. The only web3-native solution for dApps to fulfill user due diligence (KYC) in zero-knowledge natively onchain, without compromises on the decentralization & privacy ethos of web3.

🔖 Use Cases: zkKYC, zk Credit Score, zk GPS Geoblocking, zk Investor Accreditation, Onchain AML, Anti-Bot/Sybil Protection.

🚀Trusted by over 80 projects and with over 1.7 million user credentials, backed by Multicoin Capital, OKX Ventures, Robot Ventures and more. zkMe is the leading onchain compliance provider.For more information, follow the links below: