Understanding KYC And How It Works In The Crypto World

Everyone has come across the term KYC which stands short for Know Your Customer. It is a common practice that you find in all sorts of industries and they are extremely relevant in client relationships with a Crypto Casino.

KYC is always the first point of contact between a user and a certain Gambling Site, but what does it represent exactly? In addition, the emergence of cryptocurrencies has brought some enigmas regarding KYC, so here, we will focus on the meaning of KYC and how it is used in the crypto world.

What is KYC and Why Does it Matter?

As mentioned above, KYC is an abbreviation for Know Your Customer. It is a verification process that you must complete at reputable sites when you make any transaction – that way, the site can confirm your identity.

Whenever you want to get a new credit card, buy a smartphone or make deposits and withdrawals at Crypto Play Casino Sites, you must confirm your identity. Of course, this is done mainly for security and regulatory purposes, and in recent years, we have seen that practice being implemented in the crypto world.

KYC is important as it pushes financial institutions to work with governmental agencies in collecting and using data from customers. The data that you provide to the institution will be stored in a database that will run any potential risks of doing business with you.

Those databases have extensive information that might serve as a red flag for some customers, and the ultimate aim is to establish any potential financial risks of doing business with that customer.

Are AML and KYC The Same?

People often confuse AML and KYC, but we are here to quash those comparisons. Sure, they look similar, but they cover different aspects of the company’s efforts to comply with the laws of the country.

AML stands short for Anti Money Laundering and it is a process in place that seeks to control:

• Online fraud
• Financial crime
• Terrorism funding
• Other types of nefarious activities

So, AML pays close attention to the potential criminal risks, while the KYC is just an integral part of the AML, focusing on customer identification and verification.

What are the KYC Requirements?

The basic KYC requirements will vary, depending on the industry, but it is a general rule that banks and other financial services providers must implement the most strict  KYC processes.

So, a digital KYC process may comprise the following stages or requirements:

• Document verification – you will be asked to submit government-issued ID documents to confirm your identity.
• Face verification – to ensure the live presence and the identity of the person, a company may ask you to send a photo or a video holding your ID.
• Address verification – proof of address is another crucial component as companies often seek to further strengthen their data about a user.

Moreover, note that some verification may be a bit strange at first glance as companies may ask you to hold a piece of paper with a short handwritten phrase. Of course, you get the phrase from the verifier, and it is a successful technique that many businesses take advantage of.

The bottom line is that all the above-mentioned is a generalization of the KYC process, as each company works under different jurisdictions and has different requirements.

Who Regulates KYC?

KYC has a widespread presence and you will surely encounter it whenever you seek to do any business online. However, it is both an international and national process, and as such, there are different bodies overseeing the regulation and verification of AML and KYC processes.

Some countries have several bodies in charge of the processes, while others will use private organizations to handle verifications.

KYC in the Crypto World

Everyone has their own opinions about cryptocurrencies so that naturally means that their credibility will be contested, to say the least.

You will find tons of arguments for and against safety mechanisms in the crypto world, and that is normal – due to their decentralized nature, there are lingering issues on crypto’s security and credibility.

Some say that the lack of credibility is the main reason that hinders the industry’s growth, so is KYC applicable there? Let’s take a look.

KYC in Exchange Platforms – The Dilemma

As a result of the pressure for more control over the crypto world, we now see crypto exchanges having to comply with the same rules as their traditional financial counterparts.

As you can expect, some have pushed back against regulations and KYC processes, saying that the very nature of cryptocurrencies is their decentralized structure.

KYC and other requirements are the exact opposite of how a crypto exchange should work, so there is no middle point or compromise in this argument.

Some exchange sites like Binance agree that KYC is a necessity, so they ask their new users to complete such processes before trading.

Other crypto exchange sites have a rather unusual approach – they will require their clients to upload ID data when creating their accounts, but they will instantly be allowed to trade. In the meantime, the exchange will go through the data, and only if it finds something suspicious, it will act and revoke the users’ accounts.

Despite attempts to shortcut on KYC processes, crypto exchange sites will likely need to comply with these rules.

The growing influence on the crypto market means that we are likely to see KYC rules expanding even further, so we might be in for a future where cryptocurrencies will step out of the shadow.

Since there is a larger focus on international transactions that involve cryptocurrencies, companies now have to follow the compliance standards set by the International Organization for Standardization.

ISO aims to protect both the consumer and the institution from any potential threat.

What’s The Way Forward?

All in all, we can say that there are plenty of risks and benefits that come with a more strict regulation of the cryptocurrency scene.

On one side of the spectrum, we understand that people value their privacy and enjoy anonymous transactions, but clarity and standardization in the crypto world will help it flourish.

Some experts say that the crypto market is at an impasse due to the lack of regulation. KYC processes may help the industry to flourish and quash away some of the concerns people have about investing in it.

Thanks to KYC processes, companies may have more room for growth and everyone can feel comfortable, without fearing that they are breaking any law – knowing that you put your capital in a legitimate business will make you feel much more secure!

Now, the other side of the argument is obvious and is a very logical one as well. People will always argue that cryptocurrencies were created to be anonymous and decentralized, so they see KYC as sort of a censorship.

We can see both sides of the story, so it is hard to predict what will come next in the crypto world. We believe that sooner, rather than later, we will find more clarity about the direction the crypto world will go to!