What Is KYC in Crypto: Why Do Cryptocurrency Exchanges Require It?

As the cryptocurrency sector develops, it becomes clear that it will not get far without close cooperation with regulators. Supporters of the primary ideology of cryptocurrencies associated with decentralization and anonymity may not like this, but nothing can be done about it. The authorities do not want to tolerate a free tool for potential money laundering and other criminal operations at their side.

In this regard, almost all major crypto exchanges are forced to implement a procedure for verifying the identity of users, known as KYC or verification. Let’s consider this topic in more detail!

​What Is KYC or Identity Verification in Crypto?

KYC (Know Your Customer) is a concept that was used even before crypto; for example, absolutely all banks follow it, as well as brokers, many payment systems, and other companies focused on financial transactions. This is one of the stages of anti-money laundering (AML).

When a new customer contacts a financial institution, an identity verification process is initiated, giving the company an opportunity to assess the user’s risk profile and the likelihood of committing financial crimes.

On crypto exchanges, this process serves three main purposes:

  • Confirmation of the veracity of the personal information provided by a customer.
  • Verification of user activity and its legitimacy.
  • Determination of the likelihood that the customer will be involved in money laundering or other crimes.

So, KYC is a process that allows companies to make sure that their customers are really who they say they are and can be provided with financial services.

Why Is KYC Important?

In the current regulated environment, cryptocurrency exchanges must run KYC procedures and develop internal policies regarding the risks they may face. Verification requirements may vary from platform to platform, but not significantly, and the essence remains the same. For example, different types of documents may be requested to verify identity.

Cryptocurrency, in its meaning, is a new means of financial exchange, even if it is not officially recognized as such in many countries. And therefore, it must comply with the requirements of AML in order to achieve mass adoption.

Key Reasons Why Verification Is Important:

  • It helps comply with anti-money laundering (AML) and anti-corruption measures globally.
  • It serves to prevent the use of financial institutions for the financing of terrorism and other illegal purposes.
  • Companies can refuse to cooperate with a potential customer who has a dubious past or present, thereby avoiding risks for themselves and other users.

Main KYC Steps Included in the Process

Before registering on any crypto exchange, you should find out about its verification requirements if this matters to you. Firstly, many crypto exchanges do not require mandatory verification; that is, some actions can be performed without it. Secondly, the process may require certain documents, the list of which varies depending on the platform.

For example, to pass Identity verification at Switchere, you have to provide an official document that confirms your identity (ID card, passport, or driver’s license) and pass a liveness check.

The Process of ID Verification at Switchere

However, most crypto exchanges adhere to the following procedure:

  • First name and last name.
  • Address of residence — country, state, street, house, apartment. At the first stage, the address is simply indicated without confirmation.
  • Identification documents. This can be a country’s internal passport, international passport, driver’s license, or ID card. It is necessary to provide a scan or a high-quality photo.
  • Contact information — phone number, email.
  • Selfie or liveness facial check for compliance with the photo in the passport.

This is the first level of verification. But often, there is also a second one, where you need to confirm the current address where you live by providing the document that confirms this.

After uploading all the necessary documents, you need to wait until the administration checks them. This usually takes a couple of days — still, at Switchere, your verification data will be confirmed within 15 minutes if you’ve submitted everything correctly. You will be notified of the results by email. 

If the verification is rejected, the errors that caused the verification to fail will be indicated, and you can try again. The number of attempts is generally unlimited, although there are usually daily request limits.

Benefits and Drawbacks of KYC

Pros

  • Increasing transparency and trust. Users are reassured by the knowledge that trusted customers like them use the platform.
  • Reducing the crime rate in the field of money laundering and fraud.
  • Improving the reputation of crypto exchanges in the market.
  • Simplifying the resolution of disputes, for example, requiring a refund.

Cons

  • Loss of anonymity.
  • The risk of identity theft in the event of an exchange hack.
  • Time-consuming (on average, check lasts 1-2 days).

How to Buy Bitcoins with Credit Card no Verification?

As mentioned before, it is almost impossible to buy crypto without verifying your identity since the legislation of most countries takes this issue very seriously and controls it as much as possible. However, there is a solution.

This is where Switchere comes into play — a licensed online crypto exchange that allows its users to buy bitcoin with a credit card with no verification! At Switchere, you can buy and sell all leading coins for USD or EUR in the fastest and most convenient way, using your credit, debit, or prepaid card from VISA/Mastercard/Maestro or any other available payment method.

As mentioned before, most exchanges require KYC verification, which includes providing passport data, information about the current address, etc.

However, at Switchere, there is a good opportunity to buy bitcoin with no verification and no KYC for those who want to buy some crypto anonymously. All you need to do is register an account and fill in the basic information (email and phone number) — it’s easy as A, B, C and does not take much time! 

Still, one should take into account the fact that for exchanges exceeding $150, ID verification is required.

Conclusion

KYC verification on crypto exchanges is not always a convenient and desirable phenomenon, but you need to put up with it if you want to trade on centralized exchanges. Blockchain technology itself makes it possible to trade anonymously and in a decentralized manner, but this completely excludes the use of fiat money. That is, it is not very convenient, for example, for beginners who do not yet have a cryptocurrency. 

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