Crypto Exchange

Apr 6, 2024

Why KYC Is Necessary For Secure Crypto In 2024?

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As someone interested in cryptocurrency, you may have heard the term "KYC" thrown around quite a bit. But what exactly is KYC, and why is it important for crypto exchanges and users like you and me? In this article, I'll explain KYC in simple terms and discuss how it benefits both crypto companies and everyday users.

What is KYC?

KYC stands for "

Know Your Customer

." It refers to the process financial institutions and crypto platforms use to verify the identities of their customers. The goal is to prevent illegal activities like money laundering and terrorism financing.

With KYC, companies collect things like your name, birthdate, address, and ID documents. This information helps them understand who their customers are and what kinds of activities they engage in. That way, they can spot any suspicious behavior that could be tied to crime.

Why KYC Matters for Crypto

You might be thinking - why does an anonymous crypto exchange need to know who I am? Here's the important part:

Criminals love using crypto because it's relatively anonymous compared to traditional banks. In 2022 alone, illegal crypto addresses held over $20 billion worth of digital assets from scams, thefts, and other crimes. KYC combats this anonymity problem. When exchanges verify user identities upfront, it becomes much harder for bad actors to hide behind fake accounts and clean their dirty money through the platform.

Having strong KYC also protects exchanges from huge penalties if they get caught dealing with sanctioned entities or criminals. It shows regulators that the platform takes anti-money laundering laws seriously.

The KYC Process Explained Simply

The KYC Process Explained - Coin So Much

Okay, so how does KYC actually work? Different exchanges do it a bit differently, but the core process looks something like this:

  • You sign up and the exchange asks for basic personal info like name, DOB, address.

  • To verify, you'll need to upload ID documents like a passport or driver's license. Some exchanges use selfie videos too.

  • The exchange checks that everything lines up and gives you a risk rating based on your profile.

  • From there, your activity is monitored for any potential red flags of illegal usage.

  • If a transaction seems too risky based on your profile, the exchange may freeze it and ask for extra verification from you. This extra scrutiny is meant to protect everyone.

Different KYC Approaches In 2024

Not all KYC processes are exactly the same. Crypto platforms take various approaches:

Mandatory KYC

: Some major exchanges like Coinbase require KYC verification for any new user looking to trade. No ID uploaded, no account.


: Other platforms only run KYC checks if your trading volumes reach a certain threshold, or if you withdraw above a set limit.


: Companies like Changelly use automated risk scoring systems. KYC is only required if your transactions get flagged as potentially suspicious activity.


Stricter KYC standards may apply if you live in a high-risk region for financial crimes.

The right approach depends on the company's security priorities and the regulations where they operate. Non-mandatory and risk-based KYC seem to be gaining popularity as they improve the user experience.

Benefits of Non-Mandatory KYC

For a regular crypto user like you or me, non-mandatory KYC has some nice advantages over always having to verify identity:


You can start trading right away without handing over personal data or documents, unless an issue actually arises

Easy Account Setup

No more waiting periods or lengthy verification processes to get started.

Lower Fees

With simplified KYC, exchanges can pass on some of their operational cost savings through reduced trading fees.

Of course, non-mandatory doesn't mean no KYC at all. The platform still has robust identity checks ready if you ever breach their risk thresholds for full verification.

How KYC Helps Crypto Go Mainstream

At the end of the day, smart KYC implementation by crypto exchanges supports much wider adoption of this revolutionary technology. It reassures regulators that companies have anti-crime guardrails in place.

Plus, user-friendly approaches like risk-scoring and non-mandatory checks open up crypto investing to more people globally, including unbanked populations in developing nations. Those with privacy concerns can start small without excessive personal data collection.

As the crypto economy grows, platforms balancing security with accessibility will likely see the biggest boosts in new user signups. Making that first sign-up a smooth, trustworthy process is key.

Smart Regulations = More Adoption

Looking ahead, the crypto industry must continue collaborating with governments on smart, level-headed regulations around KYC and anti-money laundering practices.

That means finding a reasonable middle ground - preventing criminal abuse through strong identity checks, while also preserving the privacy, decentralization and inclusivity that make crypto so innovative.

Changelly's risk-based model is a great example of how this balance can work. They only require full KYC if their AI system detects truly


on your account. Otherwise, you can trade privately with just basic info provided.

By taking a measured approach to KYC compliance, the crypto world can shed negative perceptions, build greater public trust, and open up participation to more users worldwide - all while maintaining proper security standards.

At the end of the day, that's a win-win scenario that will help drive mainstream adoption.

In Summary

KYC may seem like a bothersome regulation, but it plays a vital role in protecting crypto users and companies from the abuse of bad actors.

Through smart implementations like non-mandatory and risk-based checks, exchanges can reap KYC's security benefits while still providing an attractive, frictionless experience for the average honest investor just looking to trade.


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