Why would you go through verification and should you be worried when providing your personal data? Each cryptocurrency owner sooner or later wonders about such a question. Why the KYC procedure is a necessity and what nuances are associated with it — tips and life hacks by BTC-Alpha.
The KYC procedure (Know Your Customer) is a set of identification operations in the anti-money laundering system (AML). Going through KYC means to provide reasonably complete personal information to counterparties-legal entities in whose favour a financial transaction is being conducted. In other words, the company must identify the counterparty before conducting the transaction and ensure that the payment will not be related to money laundering, terrorist financing or tax evasion.
For the blockchain industry, the KYC procedure is a relatively new field of use, but identifying investors and developers is becoming an integral part of the development of large and successful projects. The concept of «Know your customer» came to the crypto industry from the banking sector and exchange trading. In addition to identifying and verifying the client, tracking suspicious transactions, KYC also involves risk management. For example, for specific clients, it is rational to set filters on the type and number of transactions.
Speaking of the need to verify, it is worth highlighting the two sides of the coin: the benefits of KYC for projects and the benefits directly for users of cryptocurrencies.
Crypto projects’ compliance with the KYC is an indicator of their work in the legal field. These requirements are not a whim of financial organizations and services. Conditions are enshrined in legislation, regulatory documents of banking regulators and international organizations. The ultimate goal of all prescriptions is to prohibit the maintenance of anonymous accounts.
Violation of KYC requirements entails sanctions, reputational losses and may lead to termination of activities. To protect themselves, many companies introduce a strict KYC/AML policy that makes the client, his actions and transactions transparent to regulators.
In order for crypto exchanges’ users to provide information about themselves, various restrictions are often applied. In particular, input and output of funds, trading volumes, available functions and others can be limited. At the same time, verification allows you to demand financial compensation if the exchange for some reason loses your money.
In addition, verification of identity and going through all procedures of KYC & AML — this is an additional step to ensure the safety of your funds. If you go through the procedure, the attacker will not be able to easily steal your money, running when carrying out the transactions at the minimum into the limits, and at the maximum — into the verification confirmation requirements.
KYC includes several procedures that, with a clear implementation of actions, will not take much time and energy from you. In general, the algorithm of the KYC procedure consists of 3 main steps: identification, verification and authentication of the client.
Identification is the stage of submitting documents, at which the system becomes acquainted with the client and assigns it an identifier on the company’s server. On it, the user is given a login and password, record a voice, take a photo/video, or take a fingerprint.
Verification is the stage of checking documents and information provided, after which the system confirms the person’s identity.
Authentication — proof of identity when re-accessed. At this stage, the user enters a username and password, and the system checks his biometric data.
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For a clearer understanding of the KYC procedure, we’ll examine the example of the BTC-Alpha exchange.
After logging in to your BTC-Alpha profile, select «Verification» in the menu bar. Here you can see 4 main points, the passage of each of them will have its own advantages and requirements.
It takes a minimum of time and effort, but at the same time is an important step in the procedure.
This step requires the user to provide basic information — name, birthdate, nationality, contact phone number. At this stage, the moderator does not make a check. Be careful and enter information in accordance with the documents confirming your identity.
To verify this part, one of four documents is required: a passport/identity card/driver’s license/another identity document (passport is the best option).
You must provide the document information in text format in accordance with the original. In addition, the user must upload a high-quality photo with the above-mentioned document and note. The screenshot above illustrates the requirements that an image must meet.
At this stage, the user must provide location information for reliable accounting. To confirm the residence, the user can use one of the following documents:
Registration in the passport may be attached only in special cases. For example, if the actual place of residence (house, or apartment) is in a spouse’s, mother’s, father’s etc name.
As you can see, you should not be afraid of KYC. The verification process takes about 6–10 minutes, and moderation may take from 30 minutes to 72 hours, depending on the administrator’s workload. However, having spent this time, you will discover more opportunities.