KYC in the crypto industry: what is it and why is it needed?

Nowadays, the crypto industry is attracting more and more beginner traders thanks to decentralization and the potential for high profits. However, along with the growing popularity of digital assets, government regulation of this sector is also tightening. 

One of the main control mechanisms is the KYC (Know Your Customer) procedure, which crypto exchanges and exchangers implement to verify users' identities. In this article, we will explore what KYC is, why it has become an integral part of the crypto industry, and how it impacts the digital asset market.

What is KYC, and why is this term important in the cryptocurrency sphere?

KYC (Know Your Customer) is a mandatory procedure for identifying users of financial platforms, including cryptocurrency exchanges and exchangers. The main goal of KYC is to prevent financial crimes, fraud, and money laundering.

In the traditional financial sector, this practice has been used for a long time. In the crypto industry, however, it has become more widespread due to increased government oversight of digital assets.

The necessity of KYC in cryptocurrency

Protection from scams and money laundering

KYC helps exchanges and exchangers identify users and prevent illegal transactions, including fraud and terrorist financing.

Compliance with regulatory requirements

In many countries, crypto exchanges are required to comply with anti-money laundering (AML) regulations and adhere to financial regulators' requirements. Completing KYC is necessary for this compliance.

Security of your funds

Thanks to KYC, exchanges can enhance security levels for their customers, preventing fraudsters from accessing their accounts.

How does KYC work on crypto exchanges and exchangers?

The KYC process on cryptocurrency platforms typically involves several steps:

1. Registration and verification request. After creating an account, you will be prompted to complete identity verification.
2. Uploading documents. Usually, you need to provide a passport, ID card, or a document confirming your address (utility bill, bank statement, etc.).
3. Verification review. The platform's administration reviews the submitted documents and confirms your identity.

The requirements may vary depending on the platform. Some platforms require additional documents, such as a photo of you holding your passport.

Pros and cons of KYC in the crypto sphere

KYC has many advantages. For example, if a platform uses KYC in its operations, it automatically increases trust in it. Additionally, KYC provides protection against fraudulent schemes and improves the security of digital assets.

Of course, there are also drawbacks, such as loss of anonymity and the time-consuming nature of document verification. However, the security of your funds is the most important thing in crypto. We recommend not neglecting it so that your blockchain assets are not lost due to scams.

Can you use cryptocurrencies without KYC?

There are alternatives to centralized platforms that require verification. These include:

• Decentralized exchanges (DEX). They operate without intermediaries and do not require identity verification.
• P2P exchangers. They allow users to exchange cryptocurrency directly without verification, although they may have their risks.

However, keep in mind that using platforms without KYC may come with restrictions, such as limits on transaction volumes and available tools.

Tip from Kursoff: use reliable services where you won’t run into issues. You can find such services on our website in the Exchangers section. We personally verify each one and provide up-to-date information on exchange rates. 

How to protect your data during KYC verification?

To avoid risks, follow these recommendations:

• Use only verified and regulated platforms.
• Avoid phishing sites and check the domain before entering your data.
• Store copies of your documents in a secure place and do not send them to third parties.

Conclusion

Completing KYC on crypto exchanges and exchangers is an important step for the safe use of digital assets. Although this process has its drawbacks, it provides protection against fraud, increases trust in the platform, and helps ensure compliance with regulatory requirements. 

For newcomers to the crypto industry, KYC may seem complicated, but it plays a crucial role in the security of both users and the market as a whole. The choice between centralized platforms with KYC and alternative solutions without verification depends on each user's personal priorities.