The popularity of cryptocurrencies is arguably declining these days. From the data of CoinMarketCap.com as per June 9, 2018 – a website that lists cryptocurrencies and their respective market caps – there is “only” $344.5 billion dollars in the market, as opposed to more than 800 billion that we hit in January 2018. While there could be a lot of factors that might play a defining role in this decline, one of the clear possibilities would be the fact that cryptocurrencies are often used for criminal activities, one of the most notable being the infamous WannaCry attack, leading governments and authoritative financial figures around the world to release less-than-supportive statements for cryptocurrencies. In India, the Reserve Bank of India (RBI) has even banned buying cryptos. It is because of these facts that cryptos open up so many doors that lead to rule-and-law-breaking activities that the KYC policy is implemented.

KYC, or Know Your Customer, is a policy that requires a business to have a process where it verifies the identities of its clients, therefore assessing and preventing potential risks of illegal activities. KYC itself is a part of the AML – Anti-Money-Laundering policy, which serves as a governing head of it.

KYC has long been implemented by traditional banks, and now cryptocurrency exchanges all around the world are also implementing their own versions of KYC. Basically, the core of KYC is that a customer will have to:

  1. Provide their government-issued ID Card. Depending on the crypto exchange that you use, this may range from your national ID card, driver’s license, or even your passport.
  2. Take a selfie with the ID card that you used to verify your identity in point number 1, or with another ID card that you haven’t used to verify your identity in point number 1. A different ID card means if you have used your government-issued national ID card before, you will have to take a selfie with your driving license.
  3. Take a selfie with a piece of paper. On this piece of paper, you would usually have to provide a written statement that it is indeed really you who has registered to a cryptocurrency exchange, and you confirm that registration and sign it with your signature as shown on your government-issued ID card.
  4. Proof of address. This can be your credit card or utility bills, or a bank statement.

The processes of KYC will be different from one cryptocurrency exchange to another, but they all serve the same purpose: to ensure that they know who their customers are, therefore minimizing risks of criminal activities that make good use of cryptocurrencies.

Aside from cryptocurrency exchanges, some new ICO projects also require KYC. Take Bulleon for example. Upon registering to be able to be involved in their ICO, they will ask you to complete a KYC process that involves providing a government-issued ID Card and your selfie. KYC has become the norm, even in the world of cryptocurrencies.

As for the history, KYC has had quite a journey, although the term itself did not really come into fruition until at least the AML policy was established in 1986. As a couple of decades passed, discussions and talks were always held to ensure that governments do not lose their money because of people laundering their income sources. One could argue though that KYC was not initially in the paper when we discuss cryptocurrencies. It was not until many criminal activities began emerging that governments decided cryptocurrencies would have to implement KYC. It is no wonder, considering a crime culture has grown and spread, involving millions – or even billions of dollars.

While as a cryptocurrency investor/trader you might think that KYC is not really necessary, there are at least some reasons why it can be crucial for your investments:

  1. As one of the main hub of cryptocurrencies, the United States of America, along with its US Securities and Exchange Commission (SEC) is reportedly preparing to prosecute ICO projects that do not implement KYC when taking new customers in. If an ICO ends up being a big failure, your hard-earned money that’s invested with them could very much go poof as well.
  2. Cryptocurrency exchanges around the world are also beginning to avoid listing cryptocurrencies without KYC process.
  3. With KYC, ICOs and exchanges can work better and form healthier relationships with banks and financial institutions.
  4. Voluntary KYC compliance can help adoption on a larger scale. Globally-speaking, investors from developed countries like the USA, England, and Canada, generally like more secure projects, and KYC is one of the main ways that a crypto coin/exchange can be made secure.
  5. Since the US Dollar is still considered much of the world’s reserve currency, the US has great power in determining rules on what can be accepted and what cannot. This means that with KYC rules in place, the US is opening a new door of cryptocurrency acceptance, which can lead other countries to be more welcoming of digital currencies as wel.

With KYC, we can hope for a bright future for the crypto universe, as it gives people more security, and a conviction that cryptocurrencies are here to stay. At BCMY, we are very happy to be KYC compliant in order to help facilitate a wider adoption of cryptocurrencies by the world’s population. You can  learn more about our advanced and secure, multi asset, digital wallet app by visiting our website. Feel free to check out our wallet app and its features. We have implemented a lot of cutting-edge technologies that are going to provide you with peace of mind, knowing that your digital assets are safe.

Happy investing, and don’t forget to always do your KYC!