What You Need To Know About The KYC Process In Crypto 

Introduction

KYC stands for “Know Your Customer” and in the crypto world, it is a process that helps to strengthen security and data autonomy. Now, the crypto industry has only flourished and gained prominence in the recent decade. You’ve probably heard of Bitcoin which is one of the most popular cryptocurrencies out there in the market today.

Crypto exchanges are done entirely online on the Internet and while that brings its users a lot of conveniences, it also attracts unwanted security breaches. Unfortunately, Internet scams and account hackings are on the rise and the crypto field is not spared from such incidents. This is where the kyc process comes in. 

“Know Your Customer” was implemented to reduce and prevent any data breach and identity theft to increase the overall security of dealing with cryptocurrencies online. KYC is an entire process that both users and financial institutions have to undergo when they create an account to ensure the user’s utmost safety. 

Since KYC and cryptocurrency are considered to be fairly recent phenomena, this article is dedicated to giving you a more comprehensive breakdown of what KYC is exactly and how it works. Read on to find out more!

What Exactly is KYC?

As briefly mentioned in the introduction, KYC regulations are implemented to enhance the web safety of crypto users. How KYC works is that identity and user verification have to get a successful match before the user is allowed to proceed with any of the crypto exchanges. 

Say, for example, you want to invest in a cryptocurrency and need to first do some online banking transactions. KYC will be alerted and verify your data by requesting personal information that is unique to you. This could include your driver’s license, financial statements, and more. While this could prolong the entire process of dealing with cryptocurrencies, it is essential to help keep your personal and important information secure. The stringent and thorough process of KYC reduces the chances of identity theft and scams. It’s better to be safe than sorry.

Whether you like it or not, KYC is here to stay. The rapidly growing crypto market is vulnerable to security issues and KYC is an effective measure that enforces regulations

Advantages of The Implementation of KYC

If you’re still not convinced, you might just want to read this next section. The implementation of KYC in crypto has brought about several notable benefits. Let us take a look at some of them. 

Builds Trust Between the Company and Users

Making the KYC process mandatory implies that the company values its users’ safety. The company could have saved its resources and channelled them somewhere else instead of implementing and reinforcing the KYC. Thus, if the crypto site you’re on is mandating the KYC, you know that you’re in good hands. 

For the companies, you might just want to go ahead and get the KYC process up and running to make your brand appear more credible. With increased customer transparency and trust, existing users are more likely to stick around for a longer time and maybe even recommend them to others.

Minimises Online and Identity Scams

There is an increasing trend of cryptocurrency fraud. A study conducted by Forbes revealed shocking statistics that the number of fraud cases increased by approximately 24,000% since 2016. That is roughly around 80,000 cases. 

With the implementation of the KYC, the user’s privacy and personal information are better secured and it will create a stronger barrier against any potential hackers or viruses. 

Boosts Market Stability

With a decrease in the number of suspicious cryptocurrency frauds, the crypto market will be less exposed to volatile and eruptive transactions. In other words, the risk of investing in crypto will be reduced. 

Potential Obstacles to Implementing KYC

Each benefit of the KYC process comes with its set of challenges. 

It should firstly be noted that the crypto market is both globalised and largely unregulated. No one government or state has the entire jurisdiction over crypto and trading. International borders in this case are virtually non-existent due to the versatile nature of how crypto works and the anonymity of the trading makes it all the more challenging to apprehend any offenders. 

While implementing the KYC process is a step in the right direction, the main challenge that surfaces are the collection of data and information that complies with global standards. For example, the French government has banned the use of anonymous accounts in the crypto industry. This would call for a need to collect more data compared to other nations that allow for anonymous users. In between the two extreme ends are nations such as Switzerland and the Netherlands, where the state has imposed some of their own laws regarding the extent of identity verification required.

With so many different laws across various nations, implementing the KYC with agreeable conditions by all parties will not be a walk in the park.

How To Secure Your User’s Personal Information

While enforcing the KYC process is theoretically sound and valid, additional steps have to be taken on the company’s end to ensure that the user’s data is handled safely.

There are several third-party data storage systems available today that are designed specifically for the storage of personal data on a large scale. Persona is one of the more reputable services out there that meets all the security standards so that you do not have to worry about the legal side of things. 

Collecting and sorting a huge amount of data is no easy feat. It is highly recommended that you engage a third-party service if you’re managing a crypto business. Both you and your users will get a piece of mind knowing that the data is in good hands.

Conclusion

And there we have it! This article on KYC barely covers the tip of the iceberg but you get the gist. If you’re managing a crypto business, implementing the KYC process in your site will boost customer satisfaction which is likely to help retain more loyal users in the long run. If you’re a user looking to dive into the world of crypto, make sure that the cryptocurrency that you’re dealing with enforces the KYC process. After all, it is better to be safe than sorry!