Cryptocurrency, virtual currency, electronic money, digital transactional asset, and e-currency. All different names in the same central concept that has taken the world by storm. Decentralized digital money, all running on the blockchain concept. The technology has brought us into a world of financial revolution. As recently we have seen the exponential growth of these decentralized currencies in the year 2017. Considering that, these currencies built on the blockchain technology carry some risk.
The sheer volatility of the crypto market has invited a strong dislike from regulators and the traditional Banking system, regarding the safety of assets and individual investing it. The decentralized nature of blockchain invites the risk of money laundering and terrorist financing. In order to combat these concerns, the need for KYC – Know Your Customer based measures in cryptocurrencies is fundamental.
Why Crypto-Companies Need to Rethink KYC Implementation
We all know, the year of 2017 saw cryptocurrencies flourishing, capitalizing on the wow factor, high returns and apparent customer naiveness towards technology. However, the technology saw widespread attention from the public and regulators. The financial system had good look at the potential of the technology and how it could potentially eliminate the middle-party – Banks and the financial system itself.
The leverage factor used by banks was trust, which they are able to provide through consistency in currency value and market expectation somewhat. In comparison to the blockchain, it was fairly useable and potentially the tipping factor. The greatest edge of blockchain – anonymity is also its kryptonite that is exploited by the traditional financial system. As anonymity increases the chances of money laundering and terrorist financing through the system. Inevitably a medium of heaven to transfer funds for illicit gains and activities.
Hey, crypto companies are here to make money and become a sensation in the process. In order to have it done the right and ‘acceptable’ way. Is to implement what is necessary to make them legitimate in the process and provide a fighting punch to the traditional Banking mechanism. KYC is not just an answer, but also a necessity. If these companies wish to succeed and seek uninterrupted operations. It’s not just about the fulfillment of ‘some’ ‘random’ measures but rather gradually changing the perception of people. By molding how people perceive blockchain in general and change their opinions from what is already fragmented by regulators as unsafe and volatile.
KYC implementation will allow blockchain to compete alongside traditional systems but also revive and strengthen the trust factor, which is the fundamental bargain factor with people. Not to forget, the legal and reputation repercussion for non-compliance can cripple companies to bankruptcy. So KYC is just in the long term benefit for Blockchain based companies to implement.
Privacy Risks For Blockchain Users
Most of the blockchain experts believe that the innate reluctance shown by blockchain enthusiasts towards KYC or any other format of Identity verification services are the privacy concerns related to the personal information collected. Blockchain provides the relative anonymity to its users, thus attracting the most die-hard blockchain followers to the projects using this technology. But a blockchain based on the KYC principle means that the relative edge of anonymity is compromised whenever a user provides their personal information in order to gain access to a blockchain based service. Things become even more reluctant for a potential user when they are asked to provide their authentic official identity documents in order to gain access to a relatively anonymous platform.
But as it has been mentioned earlier as well, the blockchain industry and the new projects being launched on the blockchain needs to realize that in order to gain mainstream success, they need to get out of the shadows of anonymity, if not completely then at least relatively. In order to gain the trust of authorities and to attract a larger customer base, it is important that blockchain based technologies not only offer multiple user platforms with various functionalities but they adopt higher transparency as well because of the stigma attached to the overall reputation of the blockchain. Regulators and official authorities monitoring online activity will also be satisfied with these measures that will surely help the cause of large scale adoption of the blockchain. With more people showing interest in blockchain and technical regulators understanding the value of this new-age tech, it is time that blockchain enthusiasts and projects using this platform embraces the mainstream standards of doing business. Ultimately, enhanced data security of blockchain and legitimacy offered by KYC will help to usher a new age of technical innovations.
Crypto companies should fulfill their due diligence and KYC requirements from providers that specialize in scalability and use-cases tailored for crypto, like Shufti Pro for example. These providers ensure quick KYC for users of the respective companies. More so, specialize in documents and languages from 200+ countries of the world and providing results in less than 60 seconds!