KYC or “know your customer” laws are something the average citizen does not spend much time thinking about. However, businesses dealing with money spend a great deal of time trying to comply with “Know your customer” rules.
As a crypto-trader, you might have thought about why crypto-exchanges ask you for verification of your ID or proof of address. Wasn’t the point of crypto to remain anonymous? The answer can be either Yes and No. Indeed, cryptocurrencies initially started as a tool for people to transact anonymously and they still are. However, these days, exchanges are subject to regulations in most countries and therefore have to comply with certain policies.
KYC-practices were first established in 2001 in the US with the Patriot Act, requiring banks to follow certain ID verification requirements. Since then, global practices have been implemented affecting financial institutions as well as crypto-exchanges.
For starters, KYC was not created to be a nuisance to customers nor businesses, even though it often seems like that. Banks have spent millions trying to comply with KYC and customers struggle with the onboarding process. So why do we still stick to it?
While it may seem like an intrusion of your privacy when we ask you to upload a photo of your ID, we simply want to ensure that we are dealing with a real person.
As an exchange we are dedicated to making crypto more accessible to anyone. Part of that is improving fiat-gateways, so that you can actually buy crypto on our platform with credit card or bank transfer. When trying to create relationships with institutions from traditional finance, we won’t stand a chance if we don’t fulfill the requirements they have for customers.
Another reason for KYC is that it actually protects you. Did you know that identity theft has been rising in recent years? In the UK alone, identity theft rose by 8% in 2018. By simply asking people who want to transfer more than a certain amount of money to verify themselves, we can prevent fraudsters from signing up on your behalf.
Another benefit of KYC is that it helps investors to claim ownership of their assets. One exchange user famously reported losing access to all his funds after hackers had taken control over his mail, several social media accounts as well as mobile phone number. When contacting support with another email, the support team could not help the user as they were unable to verify him. Had he gone through KYC, he would have been able to identify himself and claim ownership of the assets in his account.
To conclude, KYC is a necessary tool serving to protect businesses as well as traders like you from falling victim to illicit activities. At the Bitcoin.com Exchange, we will always ask you for the minimum details required. Rest assured all your information will be encrypted and safely stored.