KYC
Beginner
Mar 15, 2023Know Your Customer (KYC) verification needs evaluation and check measures to assess/validate the users. The financial service providers can use it as part of the practice of fighting money laundering, tax evasion, investment solicitations, etc. KYC compliance can help in dealing with finance-related crimes and ensure high-end diligence among the users.
KYC helps in dealing with criminal practices at a greater level. From collecting the user details to verifying the customer details, Know Your Customer helps in driving trust and reliability among the investors. It has become a commonplace among the wide range of Cryptocurrency related exchanges. However, some critics may also claim that KYC is designed to avoid anonymity and no control, which Cryptocurrency boasts about.
Regulation of KYC Compliance
All sorts of KYC regulations vary from nation to nation. However, there are some common grounds in regard to collecting basic information about the user. It is possible because of the international corporation. Various European Union and Asia Pacific nations create their own regulations. But, a lot of them overlap with others including the ones governed by the Bank Secrecy Act and the 2001 Patriot Act. The EU Anti-Money Laundering Directive (AMLD) and PSD2 regulations are the major KYC norms for Europe-based nations. Financial Action Task Force (FATF) puts the laws and regulations on multinational cooperation coordination as per the simple regulatory conditions.Need For KYC In Crypto
Cryptocurrency possesses pseudonymous nature and can be used for illegal transactions or practices. There is always trouble with the laundering of illicit funds and illegal tax concerns. With better regulation and circulation of Cryptocurrency in the market, there can be complete transparency about the money flow. The user can know where the taxes are properly paid and where they’re due. It even increases the reputation of the cryptocurrency in market practices. Here are three fundamental reasons to keep KYC intact in the cryptocurrency industry -- Cryptocurrency is decentralized and anonymous. There is no need to fill in any details to start to open the trading account or process transactions. The user can easily open a Crypto wallet without much hassle.
- There is no certainty regarding the regulations in Cryptocurrency and KYC compliance. When it comes to tax measures, there are still plenty of doubts regarding the legal implications of Cryptocurrency. Such concerns are irrespective of the market boundaries or geographical locations.
- Blockchain transactions are non-reversible. In other words, there is no centralized admin to look over the concerns. No matter if you make some mistake or funds are stolen by chance, there is no chance of retrieval.
What are the benefits of KYC?
Some might presume that KYC (Know Your Customer) can increase the hassle and time to set up an account. But, there are plenty of benefits to including KYC in the Cryptocurrency domain. Not all users will be able to witness the key role of KYC in the investment funds. Instead of just enhancing the safety of the funds, the KYC norms are also helpful in dealing with crime or illegal concerns. Here are some unique benefits of KYC in Cryptocurrency and how they play a vital role in enhancing the financial system -- Lenders can keep a keen eye on the theft practices or potential frauds. It can be the prime weapon in the arsenal to fight Cryptocurrency frauds.
- It can help in assessing the customer identity and financial concerns. With complete transaction and financial history, the lenders can easily identify and assess the risk management too.
- KYC can easily avoid any concern of money laundering in the first place. It can be a protective measure to deal with investment or fund transfer concerns.
- It enhances the level of trust, reliability, security, and ownership of financial services providers. With the best reputation in the financial industry, KYC can motivate new users for more investments.
