The aim of KYC is to comply with anti-money laundering and counter-terrorist financing (AML/CFT). It helps crypto exchanges to know their clients and understand their financial transactions.
KYC is a data-driven procedure that enables crypto exchanges to verify who their clients are; to determine whether a client is qualified to use their services; and to prevent any harmful or illegal behavior related to using those services.
It is the process of locating and confirming a client’s identity using reliable, independent sources of documents, data, or information.
Why is KYC needed?
Crypto exchanges and other non-decentralized organizations are governed by the same AML/CFT laws as traditional financial institutions. They must therefore take action to stop their services from being used for unlawful purposes like money laundering.
Implementing appropriate regulatory compliance is one of the most efficient methods to accomplish this.
With the KYC process, exchanges can weed out clients who could be trying to exploit the exchange for unlawful activities by gathering certain identifying information from their customers.
Additionally, KYC might contribute to increased client trust in an exchange.
An exchange can foster a sense of safety and security that might entice new consumers by demonstrating that it is taking steps to authenticate the identities of its users.
Does KYC matter to Crypto Exchange?
Yes, it is very important for a user to know if the exchange is KYC compliant when new users sign up.
If you want to buy crypto at an exchange that is KYC compliant, they will collect your personal details like name, phone number, and government identity card, and your latest photo, some also collect users’ videos to verify them.
If any exchange is asking for all these details, it means that all your information will be shared with the government agencies. You need to keep all the records of buy & sell, otherwise you can face taxation issues.
For exchanges that don’t require KYC, they are more lenient and there may be no way that any tax authorities know of your buys and sells.
