Is KYC needed or beneficial for cryptocurrency users?
KYC/AML simplified
KYC simply stands for Know Your Customer, a process businesses use that intends to verify the identity of their clients as well as assessing their suitability depending on their own requirements. It is also used to asses the potential risks of illegal intentions like terrorism or scams. The term can be often seen in conjunction with ‘AML’, a term that stands for Anti-money laundering.
Both of these terms and processes were created long before cryptocurrencies, however, they have become extremely popular in the cryptocurrency industry.
Regulations around cryptocurrencies are a reality today, countries like the U.S. and others have pretty clear laws and regulations when it comes to different types of cryptocurrencies like securities. This regulatory pressure has forced a lot of blockchain-related businesses to implement KYC and AML practices.
The process usually involves some form of identity document like a passport or driver’s license as well as address verification.
KYC Can be Beneficial, Although Dangerous
Most cryptocurrency users do not like KYC or AML practices, however, these are quite common in traditional businesses too. Most people believe that it’s not safe to give out your personal information to websites on the internet and for the most part, they are right. Identity theft is a real and very serious crime that can damage a person severely.
On the other hand, cryptocurrency exchanges and services are usually forced to use KYC just like banks do. Often, exchanges will allow users to withdraw cryptocurrencies without having to verify their identity but will increase users’ daily withdrawal limits after verifying.
The cryptocurrency industry has seen a lot of fraud and illicit activities in the past, reducing that through the use of KYC practices is certainly beneficial for everyone, however, users should be careful. Certified and big exchanges or services will usually be safe, however, unknown ICO’s and other platforms shouldn’t be trusted. Users need to verify that the platform in question is implementing all the necessary security standards before providing them with sensitive information.
If a company is established in legal framework - KYC is necessary
Either way, these services are simply forced to use KYC or AML practices. If they do not obey, they will likely be shut down and the developers arrested. It’s clear that cryptocurrencies and the blockchain technology will become mainstream and for that to happen, we need regulations, laws as well as KYC, AML, CFT and other practices to minimize fraud. The benefits simply outweigh the cons.
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