Why We Invested in Cambridge Blockchain: Helping People Get Control Over Their Digital Identity
By Kabir Kumar and Govind Shivkumar
In a number of countries, central banks and financial institutions are coming together to create new technology platforms for Know Your Customer (KYC) data. When identity data are shared across institutions, both financial providers and consumers benefit. People don't need to provide the same information over and over again, sometimes within the same institution, and banks don't need to spend money and time requesting and entering the same data for different purposes.
These KYC utilities in the works from Singapore to Abhu Dhabi to Ireland, are meant to do a number of things: (1) reduce the cost of KYC faced by financial providers and consumers, which continues to be a barrier to use financial services especially for people with limited financial histories; and (2) make it easier to fight financial crime, which is more effectively done when institutions share data.
But designing these KYC utilities, an important piece of the regtech infrastructure, involves significant technology and business challenges and some markets have struggled. A primary hurdle is to ensure that these systems adhere to principles of Good ID, especially privacy, and the platforms are designed in keeping with new laws around consumer data access and control.
We believe Cambridge Blockchain can play a big part in helping markets overcome those struggles. This is why Flourish and Omidyar Network joined PayPal, Honchai Capital Management, Future Perfect Ventures and others in a Series A extension investment round in Cambridge Blockchain, which totaled $10.5 million.
Here are the main reasons why we like Cambridge Blockchain's solution:
A technology architecture that gives consumers greater control
The company's enterprise software makes it possible for KYC utilities to give consumers greater control over their data, while preserving privacy. Cambridge Blockchain is able to do that by bringing together elements of centralized storage and decentralized trust management. Users upload their personal data to an "off-chain" Personal Data Service. Cryptographic proofs or “attestations” certifying the validity and integrity of the user data are stored on a private, permissioned blockchain. This allows consumers to share their identity data and ensure each institution is working with the most updated version of the data. Users can share only the minimum information required for each specific need, which mitigates concerns that more data will be collected than used by the institution. Regulators can also be a node in the blockchain with access to the distributed list of attestations themselves. This is the case in Luxembourg, where the government has a copy of the zero-knowledge proofs.
Establishing a consumer data control regime through a B2B approach
Cambridge Blockchain partners with existing KYC utilities and shared systems—such as LuxTrust in Luxembourg—to upgrade them to operate on a blockchain-based system. The idea is to help those countries where market structure favors collaboration and where regulators are proactively promoting such utilities. The assumption is that such systems will start to take hold in other geographies, potentially mandated by regulators, and consortia in those markets are likely to contract those solution providers that have had experience in deploying solutions in key, pioneering markets.
Credible team with traction in complex arrangements
The cofounders, Matthew Commons, Alok Bhargava, and Alex Oberhauser, build great confidence in their partners. They are not just selling the promise of blockchain. They are not a technology looking for a solution, as is often the case in the blockchain world. They already have a commercial deployment on the market with healthy revenues in 2018. And they have been able to get traction working with government and financial stakeholders in complex consortia.
We are excited to partner with Cambridge Blockchain as they bring their innovative solution to multiple geographies. Good ID, as it core, is inclusive, offers significant personal value, and empowers individuals with privacy, security, and control—that's exactly what Cambridge Blockchain offers. And powering KYC utilities could just well be the beginning. Other potential applications include healthcare, internet of things devices, and hardware value chains, to name a few.