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As the crypto market grows steadily, there is a need for regulation and verification to prevent money laundering and terrorism financing.
KYC (Know Your Customer) is a process used by financial institutions and businesses to verify customer identities. The process includes verifying customer credentials, creating a risk profile, and detecting suspicious activity.
All-Time High Fraud Addresses in Crypto
Fraud addresses in crypto held a record $20.6 Billion in 2022, sourced from scams, stolen funds, and transactions. A study found that 56% of virtual asset service providers worldwide had inadequate AML compliance. KYC practices can prevent the concealment of illegal funds and reduce the risk of criminal activities, such as money laundering and financial support for terrorists on exchanges.
What Are The Benefits Of Crypto KYC
KYC application in the cryptocurrency world creates a safer environment by mandating the submission of personal information and documents for verification, helping control reputational damage and mitigating risks associated with illegal financial activities.
Despite its benefits, mandatory KYC raises user privacy concerns as it requires users to disclose personal information. The KYC process can be expensive for platforms to implement and maintain.
KYC can cause longer registration processes and deter potential customers. In non-mandatory KYC models, platforms reduce costs and apply less verification processes, making onboarding simpler. Changelly has an automated system in place to prevent potential risks and only necessitates verification if a transaction activates the risk-scoring mechanism. This makes KYC simple and accessible, and Changelly is working to make the crypto space more transparent.
KYC procedures required only in specific circumstances facilitate user registration without compromising security.
How Crypto Regulation As A Whole Is Benefiting The Community
The market capitalization of crypto assets has grown significantly in recent times, emphasizing the need for efforts to regulate them. Furthermore, since the government approved the Bitcoin ETF in January, this relationship has become even more complicated.
Countries Are Coming Forward
South Africa will soon require crypto exchanges to be licensed, with around 60 expected to receive permits by the end of the month. The country’s National Treasury has also announced the inclusion of stablecoins in its definition of crypto assets.
Moreover, regulating the assets gives the central bank’s Financial Surveillance Department the power. South African crypto asset trading platforms are required to report transactions involving crypto assets. This requirement is necessary for compliance. According to dailycoin(dot)com and cryptopolitan(dot)com, there has been a meeting behind closed doors with House Democrats. There, the Fed chairman emphasized the need to regulate stablecoins.
The approval of such regulations benefits traders and investors by providing a sense of legitimacy and security. While some may question the benefit of government control, it could stabilize the volatile market and make it more accessible to institutional investors.
With legality and financial crime concerns addressed, insurance companies and pension funds can include cryptocurrencies in their investment strategies, bringing legitimacy and stability to the market.
Summary
Crypto fraud reached a record $20.6 Billion in 2022. KYC application in crypto creates a safer environment by verifying personal information and documents. Increased regulations benefit traders by providing legitimacy and security. The recent crash resulted in positive market regulation.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of monetary loss.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
