Worldcoin denies using free tokens to induce users to sign up

Decentralized ID protocol, Worldcoin, appeared before Kenya’s parliament on September 6 to respond to questions about the legality of its dealings in the country. CEO Alex Blania, in the company of its chief legal officer, Thomas Scott, attempted to justify the company’s operations in Kenya, which has been deemed illegal, to the 15-man ad hoc committee assigned to investigate it.

Quick Catchup: Worldcoin launched fully in Kenya in July, quickly growing popular and registering over 300,000 people within its first week of going live.

• However, following several controversies regarding the safety and privacy of the system, Kenyan authorities issued several warnings for its citizens to be fully informed about the project before signing up.
• Some days later, the Kenyan Ministry of Interior suspended Worldcoin, and a parliament committee was set up to investigate the company’s activities.

Blania and Scott appeared before the parliamentary committee. Here are seven takeaways from the hearing.

Worldcoin did not register as a business in Kenya

Scott claims that based on current provisions of Kenya’s constitution, Worldcoin and its parent company, Tools for Humanity, were not obligated to register locally as a business or a service provider since it did not qualify as one. He said: 

“Tools for Humanity is not registered in Kenya under the Business Registration Act. We have looked at the definitions in that act as to what constitutes actual business activities, the buying and selling of goods and so forth, and concluded that were under no obligation to register.”

Tools for Humanity was registered as a data controller 

To clarify his argument, Scott said Worldcoin’s parent company, Tools for Humanity, was duly certified as a data controller. He added that Kenyan laws allow it to be a data controller yet not register locally. 

However, Member of Parliament Gabriel Kimaiyo countered that the company was not automatically allowed to operate simply because it satisfies data protection provisions of the Office of the Data Protection Commissioner (ODPC) and has been certified as a data controller and processor. He accused the company of launching its operations without seeking approval from any government entity, an allegation to which Worldcoin responded that it never needed to.

Worldcoin’s data controller certificate has been revoked 

Another MP asked the Worldcoin contingent if it was aware that, just the night before, the ODPC data controller certificate issued to the company earlier in April had been revoked. Scott confirmed the development. 

Mariblock reported last month that Tools for Humanity was registered as a data controller in Kenya, as confirmed on the ODPC’s website. A quick check revealed that the company had been removed from the list of data controllers approved to operate in Kenya.

The world’s governments can co-opt Worldcoin’s ID system 

Blania said his company had no intention of replacing the government’s prerogative to issue IDs and currencies accepted as legal tender. Instead, he disclosed that the protocol was designed so governments could decide to give legal identities using Worldcoin’s open-source protocol. 

“Within the design of [Worldcoin’s] protocol, a government can decide to use that if they would want to, for example, issue legal identities. All of that would be possible and not within our control because it is an open-source protocol that you can decide to use, and everyone else can decide to use as well. We do not try to interfere with any government in any sort.” 

WLD follows the Central Bank of Kenya’s guidelines on cryptocurrencies 

On the cryptocurrency aspect of its operations, Scott noted to the committee that the Central Bank of Kenya had no regulations on cryptocurrencies. Instead, it warned crypto companies to engage in people-centered approaches and keep their users aware of the risks involved in using cryptocurrencies. According to Scott, Worldcoin obeys this as its website highlights the advantages and risks inherent in crypto. This, he believed, followed the CBK’s guidelines. 

WLD tokens are like signup bonuses and not an inducement to register 

Blania likened the company’s distribution of free WLD tokens to users when they sign up to PayPal, paying $20 to users when they register on the platform. According to him, the motivation was not to induce coerce users to sign up but simply a tactic to ensure enough people signed up and to make the protocol operational. 

However, MP John Waweru disagreed with Blania, saying that the singular intention of most Kenyans was to get the financial reward from signing up, the amount of which amounted to 75OO Kenyan shillings. He said: 

“When we talk about the worldcoin being offered in exchange for the scan of the iris, we mean exactly that. Kenyans upon Kenyans have gone on record saying that their biggest incentive as to why they would agree to line up for hours on end was to receive 7500 Kenyan shillings. They did not see it as a token. They did not see it as an advance inducement akin to PayPal. They saw it as a transaction; there is someone in town who gives you 7500 shillings when you scan your iris.” 

Worldcoin did not classify its orbs appropriately 

Scott argued that Kenyan laws did not cover Worldcoin’s orbs and, as such, it was not illegal to operate in the country. He added that the company spoke to the authorities who inspected the orbs and concluded they needed no approval because they were categorized as biometric scanners. 

However, the chairman of the committee, Gabriel Tongoyo, accused Worldcoin of describing the orbs as mere biometric scanners and not as communication devices, which were mandated by law to be approved before being used. He added that the office of the director of criminal investigations and the office of the director-general of the communications authority inspected the orbs and classified them as communications devices. This meant that the approval of the orbs was mandatory before deployment.