The issue of verification on cryptocurrency exchanges is becoming increasingly pressing. Some are indifferent to this, while others, on the contrary, are very alarmed. Is there anything to be afraid of and do you need to confirm your identity everywhere?
What is KYC
With the development of the crypto industry, government services are making more and more attempts to regulate it. In this regard, new requirements are being introduced for various crypto institutions, in particular, for exchanges. Thus, on most modern centralized platforms the KYC (“Know Your Customer”) procedure is now mandatory, which is the collection of a certain amount of personal information about the client. You can, of course, do without this, but then the functionality available to you will be extremely meager.
Typically, the KYC procedure on any platform can be divided into three stages. The first is called the Customer Identification Program (CIP).. This is where data is collected and initially verified.. The second stage is “Comprehensive customer verification” (Customer Due Diligence, DD). Here a more thorough study of information about you takes place in case you were noticed in some kind of fraud or scam. Third stage – “Continuous monitoring”. Here the relevance of the information obtained in the first two stages is checked. In addition, at this stage, various suspicious transactions are identified, for example, those that for one reason or another can be classified as “terrorist financing”.
Why is the KYC procedure necessary?
Officially, as well as according to statements by supporters and individual representatives of government agencies and platforms with KYC, a verification system on crypto exchanges is necessary to combat various types of crimes, since if you remain anonymous, then it will be impossible to understand where this or that crime “grows legs.”
An unofficial and alternative point of view is that it is simply unprofitable for government agencies to leave payments in cryptocurrency without their “sensitive” leadership. During verification, control can be exercised; for example, some states have already introduced taxes on transactions with cryptocurrencies.
Also, together with KYC, there is such a thing as AML.
What is AML
AML (Anti-Money Laundering) is an anti-money laundering program. It was first developed in the field of cryptocurrencies in 2014 by the Financial Action Task Force (FATF), and subsequently approved by institutions such as the Financial Crimes Enforcement Agency (FinCEN), part of the US Department of the Treasury, and the European Commission.
KYC is part of AML. From the point of view of the original concept, the anti-money laundering program is much more extensive than the collection of personal data by crypto exchanges and its subsequent analysis. AML may also include the analysis of individual crypto-wallets and transactions on them, as well as checking information in various institutions for the commission of crimes.
Mandatory KYC
In fact, KYC is not required even on centralized exchanges. For example, such an opportunity is available on Bybit. Only since May 8, 2023, the functionality without verification has become very scarce and has been reduced to the fact that you can only close your positions, repay loans and withdraw money. Everything else is prohibited.
If you want to remain incognito and have access to the full range of functions, you can use decentralized exchanges (DEX) – there is no need to go through the KYC procedure. If your goal is to exchange cryptocurrency, then various exchangers will suit you. Just remember that they may be illegal or part of fraudulent schemes.
Is KYC always the same or does it have any differences depending on the site? To answer this question, let’s look at how the procedure works on two exchanges: Bybit and Binance.
KYC on Bybit
Bybit has two KYC levels. The differences in functionality are that a client with the second level will have access to higher daily transaction limits than users with the first level. So, for those who do not have VIP status with the first level, a volume of up to 1 million USDT is available, and with the second level – up to 2 million USDT.
To obtain the first level, you must provide a passport or other identity document. At the same time, your photograph, name and date of birth must be clearly visible on it.. Next, using a webcam, you undergo a comparison of your face with what is presented on your document. If everything is fine, you will see a confirmation that the verification was successful.
To obtain the second level, you must also provide documents confirming your residential address. This could include utility bills, bank statements, and registration certificates.. However, the documents must not have been issued earlier than three months ago.. That is, if you undergo verification in November 2023, then your papers should be received no earlier than August 2023.
KYC on Bybit can be done both through the official website and through the mobile application, which is available for Android and iOS devices. The verification process on Bybit takes from 15 minutes to two days.
Special mention should be made of the procedure for those living in Nigeria and the Netherlands. In an African country, to obtain the first level of KYC, you must also provide a BVN number (bank identification number). In the Netherlands, in addition to everything else, they will require you to fill out a form.
KYC on Binance
The procedure on Binance is almost the same as Bybit. Is it possible that Bybit has verification levels, but here it is called “standard” and “verification+”. The essence is the same: with the standard one, you submit an identification document and check it with your face; When “verification+” you also need to confirm the address.
The main difference between the types of verification is the daily limit on withdrawals in fiat: $50,000 with standard and $2 million with “verification+”. Cryptocurrency withdrawal for both options – up to 8 million BUSD. Review takes up to 10 days.
Thus, there are slight formal differences on the two exchanges. However, it cannot be said that they are cardinal in nature.. On other platforms the procedure will be slightly different and require more documents.
Disadvantages of KYC
Any data you provide to exchanges may be shared with government agencies upon request, which may not be to everyone's liking. “Old-school” cryptocurrency supporters, like cypherpunks, generally see KYC as a contradiction to the idea of decentralization of cryptocurrencies.
Another important point is that any such centralized storage, even the most secure, can be hacked and what is stored there stolen.. What is technically difficult to hack is sometimes hacked through psychological deception methods, which is why no CEX security system can be considered 100% reliable. This means that your personal data will be at risk and may fall into the hands of fraudsters.
This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.