Important to Know, What does KYC stand for in Crypto? - SafeLink

Important to Know, What does KYC stand for in Crypto?

Before making your purchase from any crypto platforms like Coinbase, you should know what does KYC stand for in crypto. KYC, also known as ‘Know Your Customer,’ has profound importance in the trade of cryptocurrencies. Please read on this blog post to understand what KYC is and why it is essential in the cryptocurrency world.

KYC stands for ‘Know Your Customer.’ If you are going to partake in the cryptocurrency as a money service business (MSB), make sure that you know what KYC is and how to comply with it. In simple words, if you have decided to make a Bitcoin exchange, you must fulfill the requirements of KYC.

Fundamentally, KYC is a process of knowing your customer that is quite significant in business realms. KYC enables regulators to ensure that crypto exchanges and buying/selling platforms employ the best security measures and practices. It is crucial to discourage illegal transactions while improving the security of users’ wallets and accounts.

Know Your Customer (KYC)
Know Your Customer (KYC)

KYC is a set of specific processes and procedures that a business or firm employs to confirm and verify the identity of their customers and clients.

Generally, KYC subsumes the collection and verification of the customer’s all means of identification, such as identity cards issued by the government, their physical address, phone numbers, email address, utility bills, bank statements, social security number, and so on. At times, the list of this personal information can be bothersome for your customers and users. However, for firms and specifically for crypto exchanges, it is crucial to protect themselves from issues like money laundering, corruption, terrorism, and other illegal acts.

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Crypto exchanges must gather personal information from their customers. Besides, customers should comply with KYC requirements. It is to note here that the robustness of KYC processes vary across firms and jurisdictions.

Levels of KYC
There are four fundamental levels of KYC inclusive of CAP (Customer Acceptance Policy), CIP (Customer Identification Program), Continuous Monitoring of transactions, and Risk Management.

  • CAP- this requires a company to determine and document the demographics of their customers.
  • CIP- this requires a firm to confirm the identity of their potential customers and users.
  • Continuous Monitoring- this requires crypto exchanges and crypto buying/selling platforms to monitor transactions to assure that users comply with regulations to avoid suspicious activities.
  • Risk Management- another level involves the management of risks in case any issue occurs related to transactions.

KYC Approach of Crypto Exchanges
KYC practices are continually becoming a gold standard for various regulatory bodies and crypto exchanges looking to thwart issues like money laundering and illegal transactions in the cryptocurrency ecosystem.

KYC attempts to install a level of trust between buyers and sellers. Besides, it assists business owners in building a healthy relationship with their customers. If there is no KYC, sellers will remain in the dark about their clientele who they are. Furthermore, it will leave sellers unable to protect anticipated malicious activities in the cryptocurrency ecosystem.

Final Thoughts
In brief, KYC serves as a legitimate alternative to fiat money as it helps in preventing financial crimes and other suspicious activities. So now that you have sufficient information about KYC and how it helps platforms like Coinbase, you can decide to invest in cryptocurrencies.

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