During the beef market in 2017, most crypto services lacked the correct measures against money laundering and customer knowledge. Even in 2020, 56% of the 800 cryptocurrency exchanges and OTC vendors analyzed followed poor KYC practices, according to a CipherTrace report. However, the current spike in digital assets has turned the cryptocurrency market on its head.
As a result, KYC and AML are becoming a top priority for cryptocurrency providers, and many players in the industry are rushing to take appropriate measures to get to know their customers better. Suppliers are increasingly demanding not only “Know Your Customer”, but also customers.
The trend started in January 2021, when users became more active in these procedures and showed more willingness to undergo them. Before the current beef market, only 20% of our customers who started the registration process were under complete control. This rate has now changed to 33%, which means a 65% increase in willingness to undergo KYC.
It is now clear that the attitude of both crypto businesses and users towards KYC in cryptography has changed dramatically in recent months.
Cryptocurrency exchanges use a double-edged sword only
While compliance with KYC is the standard in traditional economics, it is a somewhat controversial topic in the crypto community. On the other hand, many users refuse to disclose their data and claim that it violates basic principles of encryption, and they don’t want companies and regulators to tell them what to do. On the other hand, KYC encryption services help protect users.
For example, when someone is unable to log into their account for any reason, the provider can easily access the user if they are verified properly. This will not be possible on exchanges that do not collect customer data.
However, it took some time before cryptocurrency exchanges took KYC actions. Since companies have different vulnerabilities and each provider maintains a different level of trust and security on their platform, these measures are more important to some than others.
Whether the service provider chooses to implement KYC procedures due to regulatory compliance or business preferences, users often encounter problems trying to complete such procedures. For example, it might hurt a user to wait more than a week (or even several days) for the customer support team at a crypto exchange to verify the documents submitted.
However, with proper management, leadership and implementation, such issues can be avoided while building trust between the company and the customers. This indicates that the company takes its customers and security very seriously, and spends time and resources protecting them and their money.
The need for KYC
The growing interest in introducing correct KYC procedures among cryptocurrency businesses has been attributed to several factors. One of the first reasons relates to the bull market for digital assets today.
The rapid rise in cryptocurrency prices usually means a massive influx of new users into exchanges. Some market participants failed to deal with this sudden influx and decided to tighten “Know Your Customer” procedures to limit the number of customers on their platforms so that only those wishing to verify their identity could register an account.
Aside from investors, traders, and service providers, the beef markets also provide a good opportunity for hackers and fraudsters who are increasingly targeting the crypto industry. For this reason, stock markets turn to KYC and AML to keep clients safe by curbing fake transactions on their platforms.
At the same time, regulators have focused on digital assets, researching and developing laws governing a strong and fast-growing industry. As this sector is regulated, Know Your Customer becomes one of the pillars of compliance in the financial industry. For this reason, there will be a focus of attention when regulators implement the crypto framework.