What is KYC? Why KYC is important in the crypto market? 

In an emerging global market with a high vulnerability to cyberattacks like cryptocurrency, Know your Customer or KYC standards are developed to protect investors and institutions against frauds, hacks, and money laundering. If you are a user who used to complain about the complexity of the KYC process when signing up your account in Tokenize Xchange, this article will help you understand why KYC is complicated and how important it is. 

What is KYC?

KYC stands for Know Your Customer or Know Your Client. KYC is the process of identity verification for customers signing up in the cryptocurrency network, for example, a crypto exchange or an ICO project.

To finish the KYC process, users are required to provide their personal information such as their passport (or identity card), a photo of themselves, and their address. 

KYC procedures are applied to prevent suspicious financial activities, comply with Anti-Money Laundering (AML) Laws and protect the network against illegal activities. Though KYC means verifying the identity of the customer, it also helps the exchange to understand their customers’ typical transactions and behavior.

Why KYC is so important?

KYC is not a universal standard for crypto-related service providers. Some exchanges do not require it, while others have obligatory rules that require the KYC process to follow, including Tokenize Xchange. 

So, what makes KYC so important?

1. Prevent cybercrimes  

Since the blockchain network is decentralized and not under the control of any institutional regulation, it is more likely to be exploited by financial criminals for illegal purposes, for example, money laundering. 

Hence, KYC was built to help manage the identity of traders in the system, preventing criminal activities. Adopting KYC would become a key solution to the loss and fraud activities that occur in crypto. 

2. Building trust and transparency for customers

Cyberattacks targeting crypto exchanges in the past have caused damages of trust for customers. The KYC process would allow exchanges to identify their customers, eliminating individuals with suspicious behavior, thereby preventing illegal activities or attacks on the exchange.

For new customers, knowing that KYC processes are being implemented will let them know that they are trading in a safe platform with trusted users due to their clear identity verification. Also, this is especially important for peer-to-peer (P2P) trading services where users transfer money and get crypto coins directly among each other.

Also, the KYC process helps protect users’ benefits. In the case of losing crypto assets to a registered wallet is much easier to track than an anonymous one.   

Adopting KYC is also a key solution to the loss and fraud activities that occur in crypto. Losing your tokens to a registered wallet is much easier to track than an unregistered/ anonymous wallet.

3. Encourage global cryptocurrency adoption 

The imposition of KYC regulation can be considered as a stage to legalize cryptocurrencies. Soon, all centralized and decentralized exchanges will be asked to adopt KYC regulation in line with international regulation to encourage the adoption of crypto worldwide. 

The unregulated crypto market can be the barrier that prevents most institutions and financial corporations from dipping their feet in the crypto industry or do partnerships with crypto exchanges. Hence, by widely implementing KYC, the barrier can be taken off. 

What is Know Your Customer process

Once you have successfully signed up and verified your email address, follow the steps below to verify your identity. You will be directed to the Verification page after your first sign-in.

Below are some documents required for the KYC process by Tokenize Xchange. 

• Identity card/passport 
• A photo of your face
• Proof of residential address valid for 3 months such as electricity bill, banking, internet

>>>Check out the Identity & Mobile Verification process in Tokenize Xchange<<<

In general, KYC requirements play an important role in boosting overall user acquisition on the exchange and provide investors with a secure and trust platform to handle their transactions.