What is KYC? This is an important term in the financial sector in general and cryptocurrencies in particular. Surely when people new to investing in the crypto market will see this term. So what does this concept mean and how important is it? All questions will be answered in this article.
1 – What is KYC?
KYC stands for the phrase know your customer which means to know who your customer is. For organizations and exchanges, the term KYC means asking customers to verify their identity with identification documents such as citizen identification, passport, etc.
In the cryptocurrency market, the KYC procedure is intended to verify the exact identity of a new customer who registers on the exchange. This helps exchanges both manage customer information, verify customers and reduce the risk of customer fraud on the exchange.
The main purpose of KYC is both to reduce the risk of fraud and to combat money laundering in the cryptocurrency market.
Normally, when verifying the identity of cryptocurrency exchanges, you need to go through 3 steps as follows:
+ Declare personal information.
+ Take a photo of your identity document.
+ Face-to-face verification via camera.
2 – Importance of KYC in the crypto market
KYC is an important factor in cryptocurrency trading. This is both a database that helps the exchange to have information for law enforcement when a crime occurs.
In addition, investors will also feel more secure when investing in exchanges that require everyone to verify their identity than those that allow anonymous transactions.
Because exchanges allow customers to remain anonymous, not requiring identity verification would be extremely risky. When a crime or fraud occurs, there is no basis for law enforcement exchanges to claim benefits for the victims.
3 – Conclude
In addition to KYC authentication and identity security, there are censorship claims against anti-money laundering illegal activities. You should learn more because methods always go together. The larger the system, the higher the authentication system will need to ensure security and vice versa.
Hopefully the information we provide has helped you answer your questions about KYC. We hope it is really helpful to you.