Cryptocurrency custodian Trustology has been granted a full registration by the Financial Conduct Authority (FCA), one of a handful of firms to have been upgraded from the U.K. regulator’s temporary registration list.
In addition to the gamut of anti-money laundering (AML) checks, the FCA grilled Trustology about the custody firm’s speciality in decentralized finance (DeFi), said CEO Alex Batlin.
“The engagement was really good when we started talking about what we do for DeFi,” said Batlin. “They were very open, listened a lot and asked questions in order to understand how we do AML checks around DeFi.”
Getting DeFi institution-ready with added AML and know-your-customer (KYC) checks is now the focus of a number of firms, with solutions ranging from Aave whitelists to decentralized identity plays and even hardware security modules.
Trustology created a “DeFi Firewall” approach, by which a set of rules in a smart contract can block certain transactions and allow others; swaps on Uniswap might be allowed, while more exotic and less battle-tested platforms would be ruled out. Trustology is adding more features for 2022, such as a transaction decoder, said Batlin.
“If someone has compromised a website where you use a dapp, if it’s been hacked, instead of sending something to Uniswap you could just be forwarding funds to a thief,” he said, adding:
“So we decode the transaction you are about to sign, and then we look it up in our registry, and instead of a load of binary, we give you a text saying, ‘You are about to do a swap of ETH for DAI on Uniswap,’ for example.”