Definition ∞ Proof of Identity refers to the verification process that confirms an individual’s real-world identity, typically through official documents like passports or driver’s licenses. In the context of digital assets, this verification is often required by regulated service providers to comply with Know Your Customer and Anti-Money Laundering regulations. It establishes a link between a digital account or transaction and a verifiable person. This process is crucial for preventing fraud and financial crime.
Context ∞ The requirement for Proof of Identity is a significant point of discussion in the digital asset space, balancing regulatory demands for transparency with user desires for pseudonymity. Debates often concern the privacy implications of collecting personal data and the effectiveness of various verification methods. A critical future development involves the implementation of decentralized identity solutions that can provide verifiable proof of identity without compromising user data privacy.
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