You will be considered as an illegal immigrant if you travel abroad without your passport and proper visa documents. Similarly, in case of the cryptocurrency exchanges, it would be like doing business with people who have not gone through verification. The Know Your Customer (KYC) process implemented in the crypto world is quite similar to that of opening a bank account where you have to fill-up an application and verify with your ID.
A Little about KYC
KYC or Know Your Customer was introduced after the 9/11 attacks to prevent such incidents in the future. The anti-money laundering regulation was intended to stop common people from becoming a victim of transactions that are used to fund terrorist activities. In present times, the KYC protocol is followed by the financial institutions worldwide. It is basically a customer identification process that assists in determining the true identity of the customer.
KYC in the Crypto World
If you have signed up at a cryptocurrency exchange, then you will probably have to go through the KYC step. This will take you a step further towards trading through the exchange and it will also trust you to follow the norms. The KYC process at the exchanges may actually differ from one another. The Know Your Customer system is also focused at offering a safe and secure platform to the traders that will create a system of trust among the ion digital assets and crypto traders.
The KYC process is also vital when investing in an ICO and benefits both the project developers and those who have the interest to invest in it. Currently, there are talks of SEC taking steps to prosecute ICOs that have not implemented the KYC process. Already, SEC had prosecuted and demanded refunds for token sales from those ICOs that had not yet implemented the KYC procedures. Another reason to be on the safe side by introducing the KYC process in the ICOs is to be accepted by the crypto exchanges. Nowadays, some of the cryptocurrency exchanges simply refuse to list crypto currencies that did not go through the KYC processes.
All the concerned parties in an ICO that has the KYC process have a better chance of receiving recognition from banks and other financial institutions. The ICOs are also more likely to follow the Anti-Money Laundering regulations. Voluntary KYC compliance will also help the ICOs to reach out to more audience globally and gain their trust. The Department of Economic Development of the Isle of Man had already announced that KYC is a must.
A Guide to Digital Token Offerings released by the Monetary Authority of Singapore state that the crypto exchanges and ICOs should constantly conduct proper KYC checks and immediately report any suspicious or unlawful activity. SFC (Securities and Futures Commission) of Hong Kong and the Central Bank of Malaysia have also expressed similar opinions about KYC checks in the crypto world to reduce the risk of scams and security breaches.