Today, the introduction of KYC verifications has proven to be an effective measure in containing the increasing illegal activities in the crypto space. No doubt, the industry has over time continued to experience series of money laundering, terrorism funding, exploitation, and other related cyber vices. Although the initiation of KYC, fully known as “Know Your Customer” verifications cannot fully prevent the lingering vices, it possesses the tendency to minimize them.
Just like other institutions, crypto exchanges usually mandates their users to undergo the verifications before enjoying their services. Accordingly, this article seeks to help crypto exchange users understand the procedures necessary in carrying out the verifications and why they must begin to get it done.
Why KYC verifications?
As earlier asserted, KYC verifications is fully known as “Know Your Customers” verifications. The trend manifested as a technique to authenticate the personal identity of clients. Today, financial businesses, like banks, insurance firms, mortgage companies, and crypto exchanges now adopt the trend. As designed, KYC verifications help to ensure that users are what they claim they are.
The technique verifies the identification card, social security details, and addresses provided by users. While some crypto exchanges make it impossible to open an account with them without doing KYC, some others allow but delimit the services available to such clients. Crypto exchanges like Coinbase, for instance, allow clients to register without KYC but restrict them from buying or depositing crypto.
The KYC verification was passed into law following the September 11, 2001, terrorist attack. Since its indoctrination into law, the technique has continued to serve as a veritable tool in exposing dubious activities. Its recent adoption by crypto exchanges following series of cyber exploitation in the industry is not surprising.
Regrettably, as the crypto industry continues to enjoy rapid growth and expansion, cyber criminalities grow with it. Now, the subscription to the KYC trend helps these exchanges to track the identities of users, track transactions and drastically reduce cybercrime. More so, the technique helps the exchanges to align with existing regulations initiated to avert money laundering and other related crime.
Users, not crypto exchanges alone benefit from the trend
Users need to come to terms with the fact that not only crypto exchanges alone benefit from the prospects of KYC verifications. They as users, without any doubt, enjoy varieties of benefits from subscribing to the trend. One of such benefits is guaranteed safety in buying and selling crypto. The crypto exchanges usually activate their buying and other services to users who successfully complete their KYC verifications. Although, users can also buy and trade cryptocurrencies without KYC, particularly on decentralized exchanges. But, doing this seems riskier and tends to expose and prone users to fraudulent situations. Without ado, buying or trading after completing KYC verifications possess lesser risks.
Apart from guaranteed security, some KYC-oriented exchanges usually offer a tier upgrade to users who align with the technique. Few others also avail verified users with low fees and huge withdrawal restrictions. Binance, for instance, allows its verified users to withdraw as high as 100 BTC per day. Crypto exchanges routinely initiate these benefits to encourage more participation in the KYC verifications.
How KYC technique works in crypto exchanges
All involved crypto exchanges use similar KYC verification protocols, with only little or no distinctions. Even when little differences exist, all crypto exchange KYC verifications possess three phases. These phases include Customer Identification Program, Customer Due Diligence and Ongoing Monitoring technique. These phases usually manifest one after the order as soon as the users complete their account registration. In Customer Identification programme, also known as CIP, crypto exchanges collate and authenticate the identity of the customer.
Afterward, the phase graduated into the Customer Due Diligence process. Here, crypto exchanges conduct a robust assessment of the background of the new user. This protocol allows the exchange to wholesomely scrutinize the antecedents of the concerned user. With the Customer Due Diligence, known as CDD, the exchange gets to know if the users had in the past indulged in cybercrime and other related forms of criminalities. In a nutshell, the CDD tends to avail crypto exchanges with all the aforementioned details without any hindrance.
The successful completion of this check automatically gives users access to the services offered by the exchange. As for the Ongoing monitoring stage, the processes conducted in it remain continuous. The protocol only helps to ensure that the information availed by users stays updated all the time. Also, with this stage, crypto exchanges grossly monitor and subject ongoing transactions to consistent scrutiny. Without mincing words, all these help the exchange to adhere to existing regulations relating to finances.