By 2020, more than 56 percent of cryptocurrency exchanges and trading tables will lack KYC standards. In January 2021, the demand for KYC began to increase as consumers became more interested in KYC and became more involved in the procedure.
For any financial business, KYC is critical because it helps keep customers’ personal information safe and secure. After realizing the importance of KYC in the crypto market, end-users are increasingly implementing regulatory norms to protect their money and business.
Knowing your customers (KYC) is an important pillar of any successful business. With this approach in mind, the crypto industry takes KYC standards very seriously and implements them in the best way possible.
In 2017, when the market was expected to grow, crypto services lacked appropriate action against KYC and Anti-Money Laundering (AML). Even in 2020, more than 56 percent of crypto exchanges and trading tables will lack proper KYC standards. This was reported by CipherTrace. However, current market growth has been positive in the crypto market.
Therefore, KYC and AML have become important tools for cryptocurrency service providers, along with other industry players who are in a hurry to implement appropriate measures for their existing and new customers. This practice will help service providers get to know their customers better. Demand for KYC is growing not only for service providers but also for their customers.
It is true that the KYC event is an important step for banks and other financial businesses. However, this is still a controversial topic in the crypto business, as some users refuse to provide their details to the authorities under the name KYC. They argue that this is against the moral value of cryptocurrencies and do not want companies or regulators to direct them to do so. On the other hand, KYC helps protect users of crypto services.
The crypto industry now understands the importance of KYC. However, they took some time to adjust to this change. Business risk preferences are different for cryptocurrencies, and it is becoming more important for people to implement such measures because each service provider gives different levels of trust and security to its customers.
Consumers also face similar problems when making adjustments. Suppose a service provider decides to implement such a procedure because of regulatory compliance or business choice. In this case, users should ignore the issue and adjust it within the regulatory framework.
Waiting days or weeks for the cryptocurrency exchange’s customer support team to verify the submitted documents can be tedious for users. However, with the right management, governance and implementation, such problems can be avoided while building trust between businesses and customers.
SIGNIFICANCE OF KYC
The tide of KYC adoption should have increased tremendously, but a number of factors have contributed to the implementation of proper KYC measures among crypto businesses. One of the first reasons is the current digital capital market.
As the price of cryptocurrency rises in a growing market, the growth of customer flows must be uncontrolled. Some market players are unable to cope with this sudden flow and have decided to introduce KYC to limit the number of customers on the platform. Players are only allowed to register on the platform for users who meet the KYC criteria.
In addition to investors, traders, and service providers, the bull market provides a good opportunity for hackers and fraudsters who are increasingly targeting the crypto industry. Therefore, the industry seeks to take KYC and AML measures to ensure the safety of its customers and to protect the platform from fraud.
Regulators are also focusing on digital assets and studying and developing legislation to govern strong, high-growth sectors.
HOW KYC BENEFITS END USERS
In addition to service providers, KYC measures can help limit the risk to end-users. They are beginning to realize that the right KYC will reduce their risk, increase their confidence in the platform, and effectively protect them while using the service.
As cryptocurrencies and customer bases grow, exchanges are becoming more accountable and implementing the necessary controls, such as KYC and fraud controls. Industry players should not be afraid to introduce KYC. But this is a sign of a mature market among traditional businesses.