Now the world is very much sure that cryptocurrencies are not going anywhere, not in the upcoming years, not in the future. They are here to stay…Maybe forever! But it comes with a heavy price due to the anonymity concerns involved in the process which regulators are trying to deal with KYC in cryptocurrency.
What Is KYC In Cryptocurrency And What Are Its Benefits?
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KYC i.e. Know Your Customer is the same for crypto as it is for other financial platforms like banks or stockbrokers. They also collect the personal information of users such as their name, address, and date of birth. Government verifies the information with the already available data and allows the user to continue using the crypto exchange platforms if they’re found legit.
It comes with the following benefits
• It will help them understand their customers and answers question like who they are and what they do
• What kind of transactions they are involved in
• It plays a vital role in preventing criminal activities like money laundry, identity theft, and terrorist funding.
• Helps in stabilizing the market and improving its value as crypto are volatile in nature
• Crypto exchanges get the benefit as the risk of legal challenges and penalties are reduced with KYC compliance
• It also benefits the exchange platforms in offering trust and transparency to customers
• Customer safety is another benefit that comes with KYC in cryptocurrency
These benefits of KYC make it highly important for both customers and crypto exchanges. But some argue that it will defeat the sole purpose of crypto that’s why they are opting for other ways to buy crypto. Bitcoin ATMs and decentralized crypto exchanges are thus getting flourished which pose lots of challenges in implementing the regulations.
Also Read: Learn Exactly How To Get KYC Verified On Crypto Exchanges in 10 Minutes
3 Challenges For Crypto Exchanges
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1. Cost- It will come with the cost of verification processes and registration with the crypto regulatory bodies. In the UK alone, the cost is expected to be around $6500 for registration with FCA. The additional cost of maintaining a compliance staff will also be there
2. Customer Drop-Out- Manual verification of KYC in crypto may cause the customers to drop out
3. Security- Third-party verifiers pose a security risk for customers and crypto exchanges who hire them to perform this time-consuming process. One of the leading crypto exchanges, Binance already faced this issue whereby a KYC management company asked for a lump sum amount after stealing more than 10 thousand customers’ data.
Also Read: What is RBI’s Digital Rupee And How It Will Work In India?
Despite these risks and challenges, there’s no escape to this as cryptocurrency is gradually making its presence permanent in the market.