UK Banking Pilot Aims to Streamline Compliance Using Factom Blockchain

Crypto startup Knabu is launching a 30-day pilot today to put regulatory reporting on the blockchain.

AccessTimeIconOct 31, 2019 at 6:05 p.m. UTC
Updated Aug 18, 2021 at 11:46 p.m. UTC

Presented By Icon

Election 2024 coverage presented by

Stand with crypto

Crypto startup Knabu is piloting bank regulatory reporting with Factom, one of the earliest enterprise blockchain companies.

Revealed exclusively to CoinDesk, the London-based firm is launching the 30-day pilot today.

  • Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
    13:18
    Bitcoin Mining in the U.S. Will Become 'a Lot More Decentralized': Core Scientific CEO
  • Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
    05:10
    Binance to Discontinue Its Nigerian Naira Services After Government Scrutiny
  • The first video of the year 2024
    04:07
    The first video of the year 2024
  • The last regression video of the year 3.67.0
    40:07
    The last regression video of the year 3.67.0
  • Knabu is best known as a payments company with a smart-deposit product meant to help companies mitigate the risks of self-custodying assets on a blockchain. It is simultaneously applying for a UK banking license, aiming to establish itself as a bank that can serve crypto and blockchain firms normally excluded from traditional banking services.

    “The purpose of the pilot is to start proving some of the efficiencies that blockchain brings – specifically as core infrastructure for a bank,” Gabrielle Patrick, founder and CEO of Knabu, told CoinDesk, adding:

    “The average cost of regulatory compliance for a bank is about 30 percent of its budget. … We’re a blockchain-first company and felt that it was necessary to demonstrate the features that can remodel that.”

    Compliance costs for banks are high because of how many manual processes have to be repeated. Knabu will run know-your-customer (KYC), know-your-business (KYB) and anti-money laundering (AML) checks on customers, encrypt the data, and send it to Factom to be recorded on the ethereum and bitcoin blockchains.

    “We wanted to avoid repeating the same KYC, KYB and AML checks,” Hakim Mamoni, chief technology officer and co-founder of Knabu, told CoinDesk. “[Traditional banks] don’t have the same flexibility in terms of having access to the data.”

    As a part of wanting to bank other underserved companies, Patrick is interested in also serving small-to-medium enterprises as well as fintech startups.

    The only customer pilot participant that Knabu would name is crypto trading platform EthBits. IdentityMind will perform Knabu’s KYC and KYB checks while DMG Blockchain will use blockchain forensic tools like Blockseer and Walletscore to perform AML due diligence on customer bitcoin and ethereum wallets.

    The Factom blockchain builds data chains and then preserves them on the ethereum and bitcoin blockchains using a Merkle root. Factom’s service, which in the past was operated by customers using factoid tokens, is being run entirely by Factom with Knabu pushing data to the firm using an application programming interface (API).

    “This allows us to be able to borrow the security that you get from the power of the bitcoin and ethereum blockchains to verify that your data is what you claim it to be,” Carl DiClementi, vice president of product at Factom, told CoinDesk.

    Knabu CEO Patrick says the pilot is in line with work from the UK’s Financial Conduct Authority exploring ways in which financial institutions can digitize regulatory reporting. In the future, Knabu aims to also test reporting capital reserves on Factom’s blockchain.

    “The goal is to rip out any inefficiency and to serve underserved businesses,” Patrick said, adding:

    “Many sectors are underserved because the cost is too high.”

    Bank image via Shutterstock

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information have been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of the Bullish group, which owns and invests in digital asset businesses and digital assets. CoinDesk employees, including journalists, may receive Bullish group equity-based compensation. Bullish was incubated by technology investor Block.one.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.