As the crypto industry grows and evolves, laws and regulations for digital currency are keeping pace. Crypto providers must stay compliant while also providing an excellent user experience. Compliance revolves around Know Your Customer (KYC) processes, where crypto exchanges must verify the identity of the user in order to prevent fraud. Many of them accomplish compliance by partnering with a KYC provider — a company that specializes in KYC processes with software that enables these procedures.
Here at Onfido, our KYC platform is already used by over 30 of the world’s largest crypto exchanges and wallets. As one of the top crypto KYC providers, we’re proud to deliver the most trusted identity verification service in the crypto space. We’ve put together this brief guide to crypto KYC to help crypto providers understand why you should partner with a top crypto KYC provider and how to navigate the complicated arena of crypto KYC compliance.
Is it illegal to buy crypto without KYC?
Not necessarily. Depending on the situation, buying cryptocurrency without going through a KYC procedure may not be illegal. There are some cryptocurrency exchanges that offer the option to buy and trade without mandatory KYC verification, especially for smaller transactions or exchanges that don’t convert digital currency to fiat currency. It’s also important to note that KYC requirements vary by jurisdiction. Some countries have stricter KYC regulations, where it’s illegal to buy crypto from exchanges that aren’t in compliance.
What is crypto compliance?
Crypto compliance refers to crypto providers following all necessary regulatory requirements. In the United States, cryptocurrency exchanges and businesses dealing with digital assets are required to implement KYC measures to combat money laundering and other financial crimes. Crypto providers that are not in compliance may be subject to harsh fines and penalties.
Is KYC good for crypto?
KYC is generally good for both crypto providers and users. For both, the main benefit of KYC is increased security and consumer protection. Verifying the identity of users deters illegal activities like money laundering and scams. Users are less likely to have their accounts compromised and they can have confidence that the service they are using is legitimate and accountable.
Although there are major advantages to KYC in crypto, there certainly are some opposing viewpoints. Critics will point out that cryptocurrency was originally designed to be an anonymous, decentralized space. Instituting identity verification compromises anonymity and can make it difficult for decentralized exchanges to operate.
Ultimately, whether or not KYC is “good” for crypto depends on the perspective. Finding a balance between security and anonymity is a challenge that the crypto industry continues to grapple with as it matures.
How do you get KYC on crypto?
Most major crypto exchanges partner with a KYC platform or software provider in order to make sure that identity verification happens quickly and efficiently. KYC procedures typically include users providing personal information and submitting identification documents — such as a passport, driver’s license, or identity card. Modern KYC platforms also incorporate biometric verification, in which a user uploads a selfie or live video to verify their identity. Other documents may also be needed, like address verification in the form of a utility bill or bank statement. Due to the complexity of collecting, storing, and verifying these types of documents, exchanges can provide a smoother user experience by leveraging KYC providers rather than trying to build their own process from the ground up.
Which software is used for KYC? Partner with Onfido for crypto KYC confidence.
Searching for a crypto KYC verification software? Look no further. Here at Onfido, we have a wide range of identity solutions that help crypto exchanges become compliant and stay that way — all while providing a streamlined user experience. With Onfido’s Real Identity Platform, you’ll have access to our Verification Suite and Onfido Studio, a drag-and-drop orchestration solution. All from a single platform, you’ll experience:
- Efficient KYC processes
- Effortless onboarding
- Effective fraud prevention
With market-leading document and biometric verification, the Real Identity Platform is trusted by many established crypto exchanges (Luno, CoinDCX, BitPay, and Phemex to name a few) to confidently conduct KYC.