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KYC Crypto Compliance To Secure Cryptocurrency Market From Money Laundering

The new currencies in fact digital currencies which are considered to be volatile are getting their stakes high with each passing day. The cryptocurrency industry is affected by the supply and demand factors, the government regulations also play a vital role in the price variance of the currency. With increasing amounts each day the market size is doubling in speed, according to Forbes, the well-liked currencies such as Bitcoin, Ethereum, Dogecoin and BNB have driven a fascinating amount to $300 billion in 2021 with the assumption of bitcoin reaching an all-time higher to over $50,000 in coming times.

With a market that is full of risks, the trading process of exchanging cryptocurrencies is declared as the money service businesses (MSBs) by the authorities of CFTC, FinCen, and SEC in 2019. All the MSBs are subjected to following the KYC (Know Your Customer) and AML (Anti Money Laundering) rules proposed by the banking secrecy act of 1970 which are followed by every financial institution for the prevention of theft and crimes online.

The KYC/AML regulations are followed in the digital currencies world, with new ways to protect the community through blockchain methods of encryption. The KYC process according to most crypto firms is explained in this blog.

KYC for Bitcoin and Other Cryptocurrencies

The main concern of KYC is to reduce the number of identity scams, it works in order to verify the identity of the user by collecting all the necessary identity information from the client who is looking to trade in any means. All the financial institutions comply with KYC regulations whenever dealing with any sort of financial data i.e money in simpler terms. For e.g. initiating a new user account, providing banking loans and benefits, and making investments. This estimation of identity is done by mostly verifying the client with the help of their identity data such as documents, biometric information, and other means of detecting credibility.

Coming back to cryptocurrencies, the market is always said to be of anonymous nature, gathering user data and information is now a financial law to stabilize the market and its currencies and clients. The KYC crypto compliance asks the user to verify their identity before any online trading process, they are required to follow all the major checks of identity verification that are proposed by regular KYC regulations.

KYC AML Regulations for Financial Services in Cryptocurrency

The customer due diligence process is carried out to tackle the issue of money laundering. The AML (Anti Money Laundering) principle is carried out as a support for Due diligence to check the inbound and outbound processing of cryptocurrencies exchange. The crypto industry is now keen to perform due diligence at every step of withdrawal and transfer of financial assets between users all around the globe. Multiple AI systems are developed for this process of verification online that ensures user credibility.

According to the law, the amount of crypto exchange varies from currency to currency. To ensure the AML regulations the FinCEN and other legal authorities have created a whole check of identification of the client on every transaction that is more than $3000.

Benefits of KYC in ICO

Popularity in ICO (Initial Coin Offering) is increasing with new firms launching new coins in the market. The financial security authorities are paying much attention to ICOs as they are compiled with KYC regulations. Some benefits of KYC in cryptocurrencies are as explained below:

Enhanced Customer Transparency

With a proper KYC process, customer trust is developed as they feel secure about their investments and transfers among different trading operations within the crypto market.

Protection against Money Laundering and Online Financial Scams 

Efficient identity verification can reduce the potential of money laundering and scams up to a great mark as the market is protected against the fraudsters who look to lure the users into the traps of illegal transfers and investments.

Stabilize the Crypto Market

The E-KYC on the ICO process is an operation by which the scammers are filtered out from the cryptocurrency market making the marketplace secure for new firms and investors to trade online.

Wrapping It Up

A market of such revenue is always open to multiple risks and frauds as there is a high amount of exchange rate between the users online. The cheaters always try to destabilize the market to create a sense of mistrust between the users resulting in multiple crashes and losses. The crypto market is made secure by ensuring the proper KYC regulations for the proper implementation of AML laws and principles.

Eleena Wills
Eleena Wills
Hi, I’m Eleena Wills. Being a writer and blogger, I strive to provide informative and valuable articles to people. With quality, constructive, and well-researched articles, one can make informed choices. I cover a wide range of topics, from home improvement to hair styling and automotive.


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