11 July 2020
Cryptocurrency businesses are always looking for ways to keep their users safe. To do so, they have to follow specific regulations and laws. These regulations have been forcing blockchain-related businesses to implement KYC in their processes. Thus, every user will have to go through the KYC process to be able to exchange cryptocurrencies. This way, they will be able to use the services that are offered by brokers and exchanges.
The main questions here are what is KYC, and is it really necessary?
What is Know Your Customer (KYC)?
KYC is the abbreviation for “Know Your Customer”. This term is commonly used in businesses and banks. It refers to the process of verification for the identity of their customers, clients, or users. This process takes place before the user can engage with the platform.
Any kind of financial institution needs to have its customers’ KYC process completed. If not, they cannot have complete access to all their services.
KYC: Against Crypto Anonymity?
You may be thinking that cryptocurrency is well-known for keeping everything anonymous. It even may seem like KYC is an intrusion to your privacy. Most of the time they will ask you to upload a photo of your ID or passport. The only reason for this is so companies can ensure you are a real person and not a potential threat to their platform and their users.
But is KYC Necessary for Crypto Purposes?
The answer is yes, KYC is necessary. Cryptocurrency brokers need KYC as a warranty to their platform.
Besides, it is vital to make sure that users are not on any prohibited sanction lists. This helps financial institutions avoid having their platform used for illicit purposes. Thus, keeping Crypto clean, safe, and secure. If the negative stigma around Crypto can be avoided, this will also increase its chances of mass adoption.
Benefits of a KYC
The Know Your Customer procedure does indeed have its benefits, primarily that its keeps personal funds safe and secure. It also keeps bad actors off cryptocurrency platforms. Furthermore, KYC is a procedure that keeps the integrity standards of the cryptocurrency industry safe.
KYC also allows investors to claim ownership of their assets. Imagine that hackers had taken control over your mail and social media accounts. You reported losing access to the platform by contacting support with another email. But, the support team could not help you because they were unable to verify your identity. If you go through KYC, you will be able to identify yourself and claim ownership of the assets in your account.
Does KYC Reduce Fraud?
As we have seen before, the cryptocurrency world has seen a lot of fraud and illicit activities. These events were significantly reduced after the implementation of Know Your Customer.
But, users must be careful. There are some unknown ICOs and other suspicious platforms that should not be trusted. Verify the platform in question before providing them with your personal information.
Either way, some platforms force their users to follow the KYC process. They carry out these KYCs under the terms of their country’s regulations and laws. If they don’t obey, there is a high possibility that they can be shut down. The more people that use cryptocurrencies, the more regulations it will have.
Now, you must be asking what will happen if I don’t want to comply with a KYC? Truth is, if you do not do it, you will not be able to trade on the platform. KYC is a necessary tool that serves to protect businesses, traders, and investors from being victims of illicit activities.