The importance of KYC Process in Crypto
KYC, or Know Your Customer, is a process for verifying the legitimacy of an individual or business. KYC is often used in the financial industry. In terms of crypto, KYC is used to verify a customer’s identity before opening a new account. While cryptocurrency is widely used in this era due to its speed and borderless transactions, its theft does not prevent illegal activities such as fraud. According to statistics, cryptocurrency theft cases will be around $14.5 billion due to scams and fraud by 2024. This is where Know Your Customer (KYC) plays an important role in crypto, ensuring that financial industries avoid fraud and comply with global regulations such as anti-money laundering (AML) and counter-terrorism financing (CTF).
Understanding KYC in the Crypto Industry
KYC ensures that businesses validate their customers, allowing them to use certain services such as deposits, trading, and withdrawals. Here are some common KYC steps:
1. ID Verification: Customers must upload identity documents to confirm the customer’s identity. such as an ID card, passport, or driver’s license
2. Proof of Address: This step requires submitting utility bills, bank statements, and official letters to confirm residence.
3. Biometric Checks: Using facial recognition, liveness detection, or fingerprint scans to match the customer with their documents.
Why KYC is important in Crypto
1. Compliance with Regulatory Requirements
KYC helps crypto businesses to adhere to global regulations such as anti-money laundering (AML) and counter-terrorism financing (CFT) laws. By complying with these requirements, businesses can avoid negative consequences such as penalty fees, license termination, and risk legal sanction.
2. Preventing Fraud
With KYC the customer’s identity is valid and authentic, making the transaction secure because it is only completed by a verified user. This also makes it harder for fraudsters to conduct illegal activities.
3. Enhancing User Trust
When businesses have strict regulations and users see how many documents are required, they feel secure depositing and trading. As a result, the impact of trust increases business reputation.
Challenge of KYC in Crypto
While KYC provides some benefits, it also brings challenges, including:
1. Document Forgery and Deepfake Risks
Fraudsters now use sophisticated technologies to conduct their crimes, such as creating manipulated documents or deepfake videos. These schemes attempt to defraud businesses by bypassing the KYC process.
2. Slower Onboarding Process
Not all advanced documents in the KYC process cover all features; there are many limited capabilities that still involve human efforts for manual checking. This makes the onboarding process take longer, causes delays in account setup, and leaves new customers dissatisfied.
3. Global Compliance Complexity
Crypto works across borders, but the KYC regulations differ by country. Crypto industries have to implement KYC policies that align with international anti-money laundering (AML) standards such as FATF (Financial Action Task Force) guidelines.
4. High Operational Cost
The KYC process in crypto uses advanced technology for document scanning, fraud detection, and biometric checks (facial recognition and liveness detection). This technology is typically expensive, so many businesses implement low-cost options with limited features.
Verihubs, the Best KYC Software for Crypto in Southeast Asia
Based on the discussion above, we can conclude that KYC is crucial in crypto. Furthermore, the KYC software is necessary to verify that the process runs smoothly and aligns with regulations. Verihubs can be the best software for the KYC process. With the capabilities of document scanning, facial recognition, liveness detection, and deepfake detection, it is powerful and suitable for Southeast Asia’s crypto industry. Besides the powerful features, it is also certified by trusted global institutions such as ISO 27001 and NIST, ensuring the data is highly protected. You do not have to worry about cost, as Verihubs offers affordable prices without sacrificing its features. Contact us today to experience the advanced features!
