Key Takeaways:
- The objective of KYC guidelines is to prevent financial institutions and crypto exchanges from being used intentionally or unintentionally by criminal elements for money-laundering and other illegal activities.
- KYC helps crypto platforms to establish a user’s identity, usually by requiring identifying information (full legal name via a government-issued identification like a passport, driver’s licence, or other similar forms of identification).
What Is ‘Know Your Customer’ (KYC) in the Crypto Industry?
‘Know Your Customer’ (KYC) standards are designed to protect financial service providers, such as crypto exchanges, against fraud and other illegal activities like money laundering. It involves several steps to establish users’ credentials by requiring proof of their identity, such as a government-issued ID or licence; or other documentation, like a passport, proof of address, or biometric authentication, such as facial recognition or fingerprint verification.
KYC programmes are designed for companies and exchanges to understand who their customers and users are, and the risks they may pose. To curb illegal activities in the financial industry, governments and central banks have been adapting their KYC policies globally by creating new regulations or extending existing ones to cover the entire financial ecosystem. However, these KYC requirements may vary across different countries — including within the European Union.
As the cryptocurrency industry grows, global and national financial regulators are putting more pressure on exchanges that offer digital asset services to comply with the same rules that regulate traditional banks, as proper KYC measures help to prevent the illegal use of cryptocurrencies.
The Importance of KYC for the Crypto Industry
In 1970, the US passed the Bank Secrecy Act (BSA) to help guard against money laundering, tax evasion, or other criminal activities. It requires financial institutions to keep records of cash purchases, file reports of cash transactions, and report suspicious activity. Eventually, KYC standards would evolve from this, particularly when the Financial Crimes Enforcement Network (FinCEN) formed in April 1990.
FinCEN, a regulatory authority of the US Department of the Treasury responsible for monitoring KYC and anti-money laundering (AML) regulations, was created to support local, state, federal, and international law enforcement by gathering and analysing information about financial transactions to combat domestic and international financial crime activities falling under the BSA.
FinCEN requires financial institutions to comply with the standards of KYC, a component of AML, to prevent illegal activity. These KYC processes are employed by companies of all sizes, but they aren’t limited just to banks — insurers, creditors, fintech, digital asset dealers, and even nonprofit organisations are requiring customers to provide detailed information to ensure their proposed customers or users are who they claim to be.
In late 2020, FinCEN proposed that cryptocurrency and digital asset market participants submit, maintain, and verify customers’ identities, classifying certain cryptocurrencies as monetary instruments; thus, subjecting them to KYC requirements.
Can Users Buy Crypto Without KYC?
Decentralised applications, including decentralised exchanges (DEXs), are not required to run KYC on their users under most countries’ existing laws because these protocols are not considered financial intermediaries or counterparties. On a DEX, users trade directly with one another (peer-to-peer) by leveraging smart contracts. However, purchasing crypto requires using funds from a centralised exchange (CEX) or bank account — both of which require KYC procedures.
How KYC Works
The KYC process starts by asking customers to provide a range of basic information, which can include a user’s name, date of birth, and address (amongst other pertinent and verifiable data), which is supplemented with government-issued documentation. Once the KYC process has started, financial institutions cross-reference a user’s information, usually involving any or all of the following processes:
- Establishing a user’s identity.
- Understanding and verifying the user’s activities and the legitimacy of their source(s) of funds.
- Establishing a risk profile for the customer based on key AML factors like their activities and location.
For the Crypto.com App, the registration process requires:
- Full legal name
- Picture of government-issued ID
- Selfie
For full details of the Crypto.com KYC process, visit the Help Centre verification information page.
To create a Crypto.com account, download the Crypto.com App from Google Play or the Apple Store. Open the App and start by entering a viable email and choosing a password. After that, users need to link a payment method, such as a bank account.
Those linking a bank account in the United States will be prompted to enter KYC details to verify their identity, including name, contact information, and Social Security Number. Fully verified users can deposit funds and make withdrawals up to Crypto.com’s daily and monthly limits.
The entire account-opening process, including KYC, is handled exclusively through the Crypto.com App, and any required information should not be sent by email or through the in-app chat.
You can download the Crypto.com App here.
How to Complete KYC for the Crypto.com Exchange
Compliance is one of Crypto.com’s core competence areas. Thus, users wanting to transact on the Crypto.com Exchange are required to provide pertinent information for the KYC verification process. For the Crypto.com Exchange, the registration process requires:
- First and Last name
- Nationality
- Date of birth
- Mobile number to receive a one-time passcode (OTP)
- ID submission
- Photo
The process may take from a few hours to a couple of business days for verification, depending on factors like the quality of the pictures.
The following steps will help users through the verification process faster:
- Full Legal Name: Make sure the name is the same as the one on the document provided. If the document uses abbreviations or initials, please use full names instead. Ensure there are no spelling mistakes.
- Take a Good ID Picture: Take the picture of the ID in a well-lit environment. Make sure all four corners of the document are visible and there are no reflections. Clean the lens, hold the phone steady, and position the camera in a way that the picture frame touches the edges of the document — once it does, the picture will be taken automatically. After the picture has been captured, ensure the information is legible. If unsure of the quality, retake the picture before submitting it.
- Take a Good Selfie: When taking a selfie, hold the camera steady and follow the green dot without head movement. Try to remain still as much as possible.
Conclusion — Why KYC Is Necessary for Crypto Platforms
KYC requirements are intended to protect a company from intentional or unintentional illegal activity. With greater KYC compliance, crypto’s overall public image could benefit from regulated standards, encouraging wider adoption across the globe. For this reason, Crypto.com has industry-leading compliance standards in place to help ensure users can enjoy all that the crypto space offers — a win-win scenario.
Due Diligence and Do Your Own Research
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsem*nt, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsem*nt, invitation, or solicitation.
In addition, the Crypto.com Exchange and the products described herein are distinct from the Crypto.com Main App, and the availability of products and services on the Crypto.com Exchange is subject to jurisdictional limits. Before accessing the Crypto.com Exchange, please refer to the following link and ensure that you are not in any geo-restricted jurisdictions.
Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.
