Person Holding Gold and Silver Coins

Despite the market’s continuing volatility, major cryptocurrencies like Bitcoin, Ethereum, and Dogecoin have lately spurred a $300 billion price surge.

While the price will certainly continue to fluctuate, the emergence of crypto investments and exchanges, such as Bitpanda crypto exchange, implies that the idea is here to stay. With its Austrian headquarters, Bitpanda mainly serves the European market with bitcoin exchange services. The exchange was created in 2014 and since then has evolved to be one of the top frequent cryptocurrency exchanges in Europe for acquiring and selling Bitcoin. Check out the latest Bitpanda review to learn more.

This permanent presence of crypto exchanges is strengthened by a 2019 joint statement from the SEC, FinCEN, and CFTC that designated crypto exchanges as money service companies (MSBs) – making them subject to Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements under the Bank Secrecy Act of 1970.

Recognizing the need for KYC compliance is one thing; putting these standards into action on a large scale is quite another. Know your customer (KYC) compliance is paramount for crypto companies.

Getting a Handle on Cryptographic “Know Your Customer.”

The goal of KYC legislation is to make it more difficult for criminals to steal people’s identities by requiring companies to gather and verify important information about their clients. Financial institutions (FIs) commonly have consumers go through KYC processes when they create new accounts, ask for loans, make investments, and do other significant activities. These procedures frequently involve demands for identifying data — such as driver’s licenses, SSNs, and other financial records — verification and the preservation of this data to guarantee compliance in the case of an audit.

Despite the fact that cryptocurrency exchanges are now subject to the same laws as their conventional banking counterparts, some have argued that gathering this data weakens the anonymity of crypto. Other exchanges ask customers to input identification data when opening accounts but instantly grant trading access before confirming this data – rights are only canceled if the KYC checks uncover anything problematic. Still, others have opted to opt out of US KYC restrictions by banning access for American users.

Bitpanda increasing popularity and wider market reach almost assure that KYC standards will be expanded for exchanges and enforced more strictly, despite efforts to short-circuit or evade the restrictions.

What Are the Advantages of KYC in Crypto?

Despite the operational changes and problems that come with KYC laws, crypto exchanges stand to receive real advantages by guaranteeing regulatory compliance, including:

Greater Openness and Confidence Between Clients

Customers are more likely to stick with a crypto exchange if they have confidence in its proactive and preventative efforts to secure their accounts, which may be achieved by verifying their identities.

Reduced Possibility of Money Laundering and Other Frauds

As per recent research, more than 80,000 incidents of bitcoin fraud happened in the United States last year – up 24,000 percent from 2016. Deterring and catching fraudsters is made easier with robust identity verification.

Reduced Exposure to Legal Liability

With legal requirements always increasing, having effective KYC processes may put organizations ahead of the curve – instead of racing to catch up, they can concentrate on boosting conversion rates, simplifying transactions, and assuring compliance with growing international rules.

The Bottom Line

Crypto exchanges like Bitpanda can’t simply wait to adopt and implement the finest KYC systems.

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