My hypothesis on what the first version of on-chain KYC in Bitcoin will be and how it will be implemented.

Can you see the signals and connect them to form patterns?

—The United States is gradually promoting and legislating Bitcoin as a state or institutional store of value (“treasury”).

—Institutional investment in Bitcoin requires stronger controls/regulations.

—Governments/bankers cannot afford to allow an asset over which they have no control.

—To have that control, they need to identify users and transactions, not more pseudo-anonymity.

—Around the world, to varying degrees, regulators are promoting different methods for Digital Identity.

It is very likely that, to avoid generating too much backlash, the first version of on-chain KYC in Bitcoin will be zero-knowledge proofs, which allow the creation of reusable verified identities with high levels of privacy through cryptographic proofs, preventing companies from storing sensitive data but allowing for auditing and regulatory compliance when necessary.

These solutions are already being designed to adapt to international regulations and facilitate the monitoring of transactions without compromising individual privacy "too much".

This type of KYC won't necessarily mean that all BTC transactions will require identification, but it will enable an ecosystem where, for certain layers (such as ETFs, institutional DeFi services, banks, and public institutions), identity verification will be a condition of access or use.

That's where the normies disguised as rebels without a cause will have some leeway to defend this surveillance system.