Scammers can access and use crypto exchanges like anybody else. The following are reasons crypto companies require ID verification.
Exchanges for cryptocurrencies are a haven for scammers as well as authorities. While cryptocurrencies like Bitcoin, Ethereum, and Dogecoin are becoming increasingly popular, the market is still relatively young.
As a result, financial industry regulators examine and scrutinize the operations of cryptocurrency exchanges and other crypto businesses to stop money laundering and identity theft.
The Need Identity Verification Request
Unfortunately, as various cryptocurrencies’ value has grown dramatically over the past few years, so has scammers’ interest in them. Some people argue that Bitcoin’s pseudonymity attracts criminals. Also, Bitcoin attracts criminals for the following reasons:
- The quickly expanding consumer interest
- Enormous sums of money that people transfer in Bitcoin globally
- Regulators trying to catch up
Crypto exchanges and other cryptocurrency businesses like trustpedia.io have quickly recognized the need for more security and regulation, given the scope and sophistication of these attacks. Payment card fraud, phishing scams, and transfer fraud are some of the most frequent dangers that cryptocurrency businesses face.
Is Identity Verification a Safe Way To Protect Your Account
Cryptocurrencies are now subject to more regulation. And this has given rise to several anti-money laundering (AML) and know-your-customer (KYC) laws. Consequently, all businesses that permit individuals and companies to acquire and trade cryptocurrencies must follow the rules.
However, requesting users to upload a copy of their ID, a photo of themselves, or their signature is no longer sufficient. People can forge them with photographs taken from social media or personal information posted on the dark web, in addition to not meeting KYC and AML regulations.
What Is Crypto Identity Verification (IDV)
IDV, or identity document verification, is the procedure cryptocurrency exchanges use to confirm that new users are who they claim to be by reviewing their formal ID documents and proof of address. One of the primary KYC criteria for cryptocurrencies is IDV.
ID verification services often evaluate and verify account holders’ identities by processing data from various sources. And this may also contain third-party data, such as voter registration data, or information, like phone numbers and IP addresses.
Additionally, user identification documentation can also be necessary. And this can involve entering a unique code supplied to a mobile device or email address, uploading an ID picture, or taking a photo or a video of themselves.
Why Is Identity Verification Important?
There are several reasons why identity verification is essential for you and the exchange company.
- Increases compliance: KYC is a mandated legal process in many jurisdictions for fintech and cryptocurrency. Failure to follow AML and CFT regulations properly may result in fines or licensing problems.
- Decreases fraud. Knowing your clients better allows you to monitor (or outright block) anyone who seems to be a high-risk consumer, which reduces copies of all kinds.
- Increases consumer trust: By implementing rigorous KYC, you may raise consumer confidence by showing your clients that you value their company and uphold the law.
- KYC laws protect the financial ecosystem, and it works to stop fraud, money laundering, and the financing of terrorism.
- It safeguards your reputation. The standing of your cryptocurrency platform is comparable.
IDV and KYC Challenges and Risks for Crypto Exchanges
When it comes to KYC, cryptocurrency exchanges struggle, despite having the best of intentions. That’s due several reasons. For instance, there are several different sorts of fake IDs. Fraudsters know KYC requirements and are well-armed. It’s simpler than you think to get accepted on a cryptocurrency exchange using a phony profile from fake IDs.
Also, users desire instant market access by achieving security and friction balance, particularly when they are as volatile as cryptocurrencies. Therefore, you risk increasing churn and losing prospective repeat clients if you create fewer barriers during the onboarding process.
Crypto companies have varied reasons for requiring customers or clients to verify their identities. Nevertheless, verifying crypto users’ identities face many challenges due to cryptocurrency’s global nature.