Total Verification On Crypto Exchanges: KYC & AML

WhiteBIT
Published 29 December 2020

Our confidential data is very precious: we provide it to the companies with caution, and we’re especially wary of the verification procedures. A few years ago, many crypto users began to discuss the requirements for passing KYC and AML negatively.

You won’t surprise anyone with this procedure now, but some are still afraid to send their documents or selfie with a passport. Let’s figure out why trading platforms need our data and how to determine a reliable exchange by the KYC and AML presence.

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Verification trend

KYC (Know-Your-Customer) is a procedure that is used by financial institutions to confirm the identity of a client for further service provision.

But anti-money laundering is a broader concept.

AML(Anti-money laundering) is a set of measures and laws aimed at preventing illegal activities in the financial sector.

AML procedures are set up to avoid terrorist financing, securities fraud, and market manipulation.

KYC and AML have long been used by financial institutions (for example, banks) to prevent illegal money turnover. In the case of crypto exchanges, verification is confirmation that your digital assets were not involved in illegal fraud.

Let’s start with the fact that if you’re faced with the “Pass verification” page, then you don’t need to close the tab. It is one of the hallmarks of a licensed platform, and KYC even helps protect you from potential risks.

As you may have guessed, a centralized exchange that doesn’t require any data from you doesn’t bear any responsibility to its customers. Whenever you find yourself using such an exchange, feel free to click on the red cross in the upper right corner.

Regulated environment for safety

The cryptocurrency industry is a young direction, the rules within which are just being formed. According to statistics from analysts at CipherTrace, more than 50% of cryptocurrency platforms in 80 countries don’t adhere to KYC and AML procedures at the proper level, thereby leaving room for manipulation of users’ money and terms of service.

The presence of AML and KYC helps exchanges combat potential charges from law enforcement agencies in matters of terrorist financing and facilitating illegal money laundering.

But for the user, verification is a guarantee of the company’s transparency and honesty.

Basically, this is a win-win situation: the exchange is confident in you, and you use financial services in a regulated environment.

An excellent example of the consequences of the AML and KYC absence is the scandal with the BTC-e exchange, the administrator of which laundered $4 billion. As a result, the accused was punished, and the exchange ceased its activities.

At the same time, the presence of a regulator’s license and verification procedures for customers could prevent this situation and save BTC-e from collapse. In fact, this would allow confirming or refuting the legitimacy of funds, as well as charging a specific user, without reputational risks for the company.

Conclusion

Without a doubt, the emergence of KYC and AML on more exchanges is a good indicator of the crypto industry growing. It also helps to raise the confidence level of both users and regulators.

Moreover, KYC helps to minimize the risk of theft and increase users’ protection. If suspicious transactions are detected, they will be stopped and, after identification, returned back.

However, there is still no standardized KYC/AML procedure in the crypto area. A unified approach would simplify the many blockchain businesses and contribute to the crypto revolution, the goal of which is to fundamentally change the financial sector fundamentally.

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