What is KYC & How Important Is It For The Global Crypto Community?
Regulators around the world are aiming to create global standards for major cryptocurrency platforms across the globe. Basically, these standards apply to all financial institutions and are known as Know Your Customer (KYC) or identity verification. Its essence is that users of the service, upon registration or after it, must provide documents identifying their identity, for example, a valid ID card, driver’s license, photo.
Why is KYC verification necessary? What does it mean for the global crypto community? Today, we’ll take a closer look at these questions and more in this article. But first things first. What exactly is the KYC procedure?
KYC, or Identity Verification
Between 2000 and 2010, most jurisdictions enacted legislation governing KYC and AML (Anti-Money Laundering Laws). As a result, banks and related financial institutions have become compulsory to comply with the requirements of anti-money laundering legislation.
In the crypto community, the KYC procedure was accepted with a grain of salt, as users were afraid to disclose their data, which could fall into the hands of fraudsters. Moreover, the KYC procedure in its essence contradicts the very idea of anonymity in the use of cryptocurrencies. However, the growing popularity, infrastructure development, and adoption show a gradual mood swift in many countries.
KYC procedure refers to the verification of a customer’s identity, typically by a financial institution. ID document requirements vary depending on an institution or even a region. That is why sometimes there are more rigorous restrictions applied, and sometimes less. If users do not complete the KYC procedure, they may not access all the features on a cryptocurrency exchange. For example, the Binance exchange provided such limited access to its customers. Users could create accounts, use basic functions, and perform limited transactions without submitting KYC information. Recently, however, it changed its policy, and from now on, only fully verified users can use the exchange.
KYC requirements are becoming mandatory on many cryptocurrency exchanges. They are aimed to combat illegal activities and identify suspicious behavior at an early stage, ensuring that transactions comply with regulations and laws.
Role in Crypto
In the crypto industry, the widespread use of the KYC procedure always has its supporters and opponents. Thus, among the crypto evangelists, the first of whom is, of course, Satoshi Nakamoto, the idea is to build a decentralized world. The approach here lies in a transparent financial system that provides greater financial inclusion for everyone and at the same time protects the privacy of people when making transactions.
On the other hand, the KYC verification gives access to a much wider crypto payments adoption and opens doors to the rest of the world. Weighing all circumstances, we can get a thorough picture of what KYC can do:
- Build trust. Peer-to-peer platforms are an easy place to scam and trick users. Any oversight can lead to the inevitable loss of money with no way to return it. It’s much easier to get support and get your funds back in case of fraud with the KYC procedure.
- Lower risks of crime & hacks. There is a wide range of illicit activities such as tax fraud, bribery, corruption, terrorist funding, etc. The cryptocurrency market is at high risk from criminals and hackers due to the lack of clear regulation.
- Stabilize the crypto market. When the systems assess risks to protect its users, the market becomes more stabilized through increased trust, and therefore use.
- Ease the crypto regulations. In the light of upcoming crypto market regulations, many institutions will be a step ahead by gearing up to comply with the requirements.
Obviously, there are some flip sides to KYC. In some ways, KYC requirements make cryptocurrency exchanges similar to traditional financial institutions by giving power to a centralized authority. Besides, the existing fears of private information safety are not unfounded. In order to address users’ concerns, crypto exchanges, first of all, have to provide robust KYC systems to secure consumer information and prevent any loopholes in the software.
Find the best solution
The crypto market is maturing. That is why many financial institutions make a safe bet to put effort into customer security measures early on to become the most successful in the long run. Some users may adhere to the concept of complete anonymity, but Binance and other major exchanges are trying to comply with the KYC requirements.
Whether you are a decentralization supporter or would like to meet all legal requirements, we at Finscanner will make sure to find the most acceptable crypto option for you!
Here are some of the Centralized Crypto Exchanges available at our marketplace:
- Binance — a crypto exchange founded in 2017 by Changpeng Zhao and registered in the Cayman Islands. It is the largest cryptocurrency exchange in the world in terms of trading volume, with more than 1.4 million transactions per second. The exchange strictly adheres to US regulations, is compatible with multiple devices, and provides safe and convenient trading.
- Okex — a cryptocurrency exchange created in 2014 by Chinese developer Star Xu. It makes it easy to buy, sell, or trade cryptocurrencies by offering over 400 trading pairs, including pairs with fiat. OKEx offers advanced financial services as well as excellent guides for anyone new to crypto. There are investment programs, a referral program, and additional bonuses.
By contrast, you can also take advantage of the Decentralized Crypto Exchanges:
- Uniswap — an open-source decentralized exchange protocol built on the Ethereum blockchain and operated by smart contracts. The popularity of the Uniswap decentralized exchange is breaking records as it ranks first in the Ethereum (ETH) network. Full decentralization, anonymity, availability of a large number of coins.
- PancakeSwap — a decentralized cryptocurrency exchange powered by the Binance blockchain. The exchange was founded in 2020 and has already gained great popularity in DeFi. Today, its daily turnover is over $ 800 million.