- 2020 over 56% of crypto exchanges and trading desks lack the proper KYC norms
- increasing demand for KYC began in January 2021, when users started showing more interest in KYC and started involving more in the procedure
For any financial business, KYC becomes very important as it helps keep the clients’ identities safe and secure. After understanding the importance of KYC in the crypto market, end-users end-users are increasingly adopting the regulatory norms to protect their money and business.
Know Your Customer (KYC) is an essential pillar for any successful business. Keeping this approach in mind, the crypto industry is becoming very serious about the KYC norms and is implementing them in the best possible manner.
When the market showed a bullish trend in 2017, there was a lack of proper KYC and Anti Money Laundering (AML) measures by the crypto services. Even in 2020, over 56% of crypto exchanges and trading desks lack the proper KYC norms. The CipherTrace report has reported this. However, the current market rally has turned the way towards a positive direction for the crypto market.
Hence, KYC and AML have become the crucial tools for the service providers of cryptocurrency, along with many other industry players who are in a rush to implement the norms to take the proper measures of their existing and new customers. This practice will help the providers to know their customers better. The demand for KYC is increasing not only for the providers but also for their clients.
This increasing demand for KYC began in January 2021, when users started showing more interest in KYC and started involving more in the procedure. Before the present market, only 20 percent of customers began the registration process and were fully verified by the authorities. This has jumped to 33%, which means that 65% of people willingly show interest in passing KYC.
Hence, the attitude and behavior of the crypto providers and their users have changed drastically over the few months.
It is a fact that the KYC measures are an essential step for banks and other financial businesses. Still, it is a controversial topic with the crypto business as some users refuse to divulge their details in the name of KYC to the authorities. They argue that it is against crypto’s moral values, and they do not want companies or regulators to direct them on what to do. On the other hand, KYC helps crypto services protect the users.
Now, the importance of KYC has been understood by the crypto industry. However, it took some time for them to adapt to this change. Since the businesses’ risk appetite varies in cryptocurrency, and every provider gives a different level of trust and security to its users, such measures become more important to adopt for people.
The users also deal with such issues when implying the regulations. Suppose a service provider decides to implement such a procedure due to regulatory compliance or business preferences. In that case, the users need to overlook the issues and adjust to the regulatory framework.
It can be tedious for the user to wait for days or weeks for a crypto exchange’s customer support team to verify the submitted documents. But with the proper management, governance, and implementation, such issues can be avoided while promoting trust between the business and its customers.
Importance of KYC
The wave of adoption of KYC must have increased tremendously, but several factors were involved behind the implementation of proper KYC measures among crypto businesses. One of the first reasons is the current digital asset bull market.
With the increasing prices of cryptocurrency in the bullish market, the customer influx’s increment must be uncontrolled. Some market players cannot cope with this sudden inflow and decide to put KYC into place to limit the number of customers on their platforms. The players allow only those customers to register on their platform who have passed the KYC measures.
Besides investors, traders, service providers, the bull market also give good opportunities to hackers and fraudsters who are increasingly targeting the crypto industry. Hence, the industry is looking to adopt KYC and AML measures to ensure their customers’ security and hold on to their platform’s fraudulent activities.
Regulators also focus on digital assets, researching and drafting legislation to manage a robust and high-growth industry.
How KYC benefits end-users
Apart from the service providers, KYC measures will also help limit end-users’ risks. They are beginning to understand that proper KYC will reduce their risks, increase the trust towards the platform, and effectively protect them while using the service.
With the increasing growth of cryptocurrency and the user base, exchanges are becoming more responsible and implementing KYC and other required control like fraud monitoring. Industry players should not fear the rise of adopting KYC. Instead, it is a sign of a mature market among the traditional businesses.