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What is KYC? Why is it important?

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What is KYC?

Firstly, Know Your Customer (KYC), or Know Your Client, is a term that refers to the process. Which a company or organization validates the identity of its customers. Banks, lenders, insurance providers, and other financial and monetary institutions of all sizes must follow the methodology. What is KYC for crypto? It’s a method for cryptocurrency exchanges (or any other crypto-related business) to authenticate the validity of their customers and clients. KYC is a data-driven procedure that encourages firms to verify that their clients are. Who they claim to be, determine a user’s suitability for their services, and prevent malware activity associated with their use.

Importance of KYC in crypto

Meanwhile, People who work for government-regulated businesses have to make their own KYC program. And write their own company policy based on their own interpretation of the law. That applies and their own evaluation of the risks they face. This results in a wide range of KYC requirements, including various types of data that must be verified, such as identity cards, utility bills, driver’s licenses, and bank statements, among other things.

Meanwhile, Cryptocurrency, which is a new way to exchange money, needs to follow KYC procedures to be used by many people. Because KYC is necessary, we need to talk about why it is essential. How it works, its benefits, the laws that apply to it, and how it will change in the future.

What is KYC Why is it important

 What are the main risks of not having proper KYC in place for crypto trading?

  • Greater chance of money laundering and terrorist financing through user accounts that aren’t visible to the public.
  • Having customers who are on blacklists or who have been associated with financial crimes not be able to see or control their transactions
  • Enabling ID theft is terrible.

Benefits of KFC in Crypto Trade

  • Establishing customer trust

The ability to verify identity is one of the most significant aspects of KYC exchanges, particularly on peer-to-peer cryptocurrency trading platforms, where users trade between themselves.

  • Evaluation of the dangers

Meanwhile, Incorporating Know-Your-Customer (KYC) procedures and precise identity verification of users allows exchange platforms to assess the risk level of every client, identify potential risks, and more closely monitor specific groups of customers.

  • Fraud is less likely to occur

When it comes to providing security to any platform and its users, individual customers’ risk assessment is among the essential aspects. This enables cryptocurrency exchanges to identify possible risks early on and apply suitable policies to nullify attempts at fraud, scam, and financial crimes.

Bottom Line

Finally, KYC rules in the traditional financial and non-financial sectors aren’t likely to be change. However, in the cryptocurrency world, there is a lot of debate about what should or should not happen next.

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