Banks and cryptocurrency exchanges, the activities of which are based on financial transactions, resort to the “Know Your Customer” system. The KYC rules ensure verification of a person's identity for participation in illegal organizations, seized accounts, or possible sanctions.
Before making your first transaction, you need to submit documents: your passport, a certificate of income, a residence permit, or a receipt for payment of utilities at your address. These securities are checked on several bases, after which they determine your level, access to money transactions, how much you can withdraw or transfer to your account. Since cryptocurrency transactions are non-refundable, an improved security system is needed.
Let's look at the advantages and disadvantages of the KYC system.
The benefits include:
- Security and protection of assets. Projects that introduce “Know Your Customer” protect their clients from potential loss of their finances or personal data. By choosing such a company, you will be sure that fraudsters will not be able to access your account. Legal standards protect clients with any amount of money in their accounts.
- Confidence of customers. The reputation of the company depends on successful deals. If you introduce the system “Know your customer”, it automatically increases loyalty to your company. It’s easier to track suspicious transactions and attempts to log in to accounts.
- Assessment of the possible risk. During verification, clients submit data on their official income with which they pay tax. Financial history allows you to determine what amounts they can give to particular clients.
- Legality. Verification ensures transparency of transactions. This is necessary to track money laundering or illegal financing transactions.
- Fight against fraud. The package of documents that must be provided is checked by several security systems. If the slightest discrepancy is found, a person will not be able to carry out operations. Verification also allows you to enable 2-Step Verification. You can link your bank or stock exchange account to your email or phone number. If you try to log in from an unknown device, you will receive an alert.
KYC also has disadvantages.
The most obvious ones are:
- Lack of anonymity. For the most part, this applies to crypto exchanges, where the main principle is decentralization. Although this is already a controversial statement since regulatory laws for the crypto market are already being formed one way or another in many countries. Kycaid helps many projects in the crypto world to maintain the principle of anonymity and at the same time increases their security and will help to comply with new rules.
- Access to data. Companies are responsible for the safety of your personal information, but there are always certain risks of hacking.
- Waste of time. It takes a lot of time to fill out all the papers, scan, record photos and videos. And if you need additional proof of income, payment of taxes, or proof of assets, it will take even more time and effort. Collecting all of this can take up to several hours, and the verification will take more than two weeks. Depends on the company policy and what kind of verification systems they use.
As you can see, the most basic pros of KYC exceed the number of its cons. Moreover, with the development of technologies and new approaches, all negative aspects can be completely eliminated.
Kycaid platform is based on a holistic approach to solving business needs in compliance and easily refutes all the disadvantages listed above.