During 2017’s bull market, most crypto services lacked the proper Know Your Customer and Anti-Money Laundering measures. Even in 2020, 56% of the analyzed 800 cryptocurrency exchanges and over-the-counter trading desks followed weak KYC practices, according to a CipherTrace report. However, the current digital asset rally has turned the crypto market upside down.
As a result, KYC and AML have become top priorities for cryptocurrency providers, with many industry players rushing to implement proper measures to better know their customers. And it’s not just the providers that are increasingly demanding KYC, but also their clients.
This trend began in January 2021, when users started to get more involved with and showed more willingness to pass these procedures. Before the current bull market, only 20% of our customers who started the registration process became fully verified. Now, this rate has changed to 33%, which marks a 65% increase in willingness to pass KYC.
It has become clear now that the attitude of both crypto businesses and users toward KYC in crypto have changed drastically in recent months.
The double-edged sword crypto exchanges are only wielding now
While compliance with KYC measures is the standard in traditional finance, it’s a rather controversial topic in the crypto community. On the one hand, many users refuse to disclose their data, arguing that it’s against the core principles of crypto, and they don’t want companies and regulators to tell them what to do. On the other hand, KYC helps crypto services in protecting their users.
For example, when someone is unable to log into their account for whichever reason, the provider can easily restore access for the user in case they are properly verified. Doing so would be impossible on exchanges that do not collect any customer data.
That said, it took quite some time for cryptocurrency exchanges to adopt KYC measures. Since the risk appetite of businesses varies and each provider maintains a different level of trust and security on its platform, such measures are more important for some than for others.
Whether a service provider decides to implement KYC measures due to regulatory compliance or business preferences, it’s not unusual for users to face issues when attempting to comply with such procedures. For example, it can become painful for a user to wait over a week (or even a few days) for a crypto exchange’s customer support team to verify the submitted documents.
However, with the right management, governance and implementation, such problems can be avoided while promoting trust between the business and its customers. Doing so conveys the message that the company takes its clients and their security seriously, dedicating its time and resources to protect them and their funds.
The need for KYC
There are several factors behind the increased interest in implementing proper KYC measures among crypto businesses. One of the first reasons is related to the current digital…