Sri Lanka's central bank has narrowed down its list of developers for a proof-of-concept blockchain-based KYC system. The central bank announced last year that it would incorporate blockchain into ban
Sri Lanka's central bank has narrowed down its list of developers for a proof-of-concept blockchain-based KYC system. The central bank announced last year that it would incorporate blockchain into banking to strengthen security and prevent fraud. Thirty-six software companies, both domestic and foreign, submitted proposals for the contract.
D. Kumaratunge, a Director at the central bank, said: "We invited software companies to develop a shared KYC proof-of-concept free of charge as a national project. The response from both local and international firms has been overwhelming, and we have finalized our selection of suitable applicants to begin development shortly."
The central bank selected three firms: two from Sri Lanka and one international company.
KYC systems verify customers' identities when they open bank accounts. Banks use ID documents, utility bills, facial recognition, and biometric data to confirm who customers claim to be. Staff must handle extensive paperwork and conduct manual verification.
Using blockchain, banks could streamline verification. The system encrypts client data and distributes it across a network. When client information changes, the system confirms whether the modification is legitimate and authorized, flagging suspicious alterations and enforcing system protocols.
Traditional KYC relies on bank staff entering customer documents into databases. Blockchain reduces the number of people needed for this work, cutting both time and costs.
No central bank or government has deployed blockchain-based KYC at scale. If Sri Lanka succeeds with this system, other central banks may adopt the model. The technology could also benefit unbanked populations worldwide. High fees and limited affordable banking options in the developing world keep millions from accessing formal financial services. Cheaper verification procedures would open banking access for these people.
