Mining City Reviews the Importance of Know Your Customer (KYC), Compliance, and Cryptocurrency

Money laundering and fraud are serious issues in the cryptocurrency industry. Financial institutions and governmental bodies have been trying to regulate cryptocurrencies to fight this problem. There still aren’t foolproof methods, but there are different processes to help ensure cryptocurrency compliance.


Know Your Customer or KYC is just one way that financial institutions try to assert compliance amongst their clients. Know Your Customer is simply a process of vetting clients to help mitigate crypto laundering. KYC falls under the umbrella of anti-money laundering tactics. 

If you are interested in crypto exchange, you need to know about KYC. Even if you were working completely within the bounds of the law, the KYC process will impact you. It means that you might not be as anonymous as you might want to be. Even so, KYC is needed in a crypto exchange. It helps to mitigate risk and prevent money laundering using cryptocurrencies.

To learn more about KYC, compliance, and cryptocurrency, keep reading. This article fully explains KYC, what it looks like, why it is needed, and its implications on crypto exchanges. Anyone in the cryptocurrency exchange game needs to know this information. 

What Is KYC?

KYC is an acronym that stands for Know Your Customer, and it is a process in anti-money laundering compliance regulation that is used around the world. It refers to a financial institution’s obligation to verify the identity of clients before allowing the client to use their product and/or platform. Institutions do this through background checks and other mediums. 

The KYC process is pretty broad. It includes a number of due diligence measures, screening, and monitoring steps to keep customers engaged with the firm. The process itself varies from firm to firm, as well as client to client. 

KYC is just one way that regulators fight money laundering, including crypto money laundering. The purpose of KYC is to stop criminals from hiding their illegal money sources behind the legal financial activity. This makes it more difficult for money launderers to get away with their fraud.

What Does KYC Look Like?

As mentioned above, KYC has many techniques and measures for keeping industries and clients in compliance. Some of the most common KYC practices include the following:

  • Identity verification 
  • Customer monitoring 
  • Adverse media

Of course, the KYC process is often tailored and adjusted for each individual case. For example, Client A might not get the same approach as Client B, even if both clients have accounts in the same financial institution.  This makes the process more effective on a case-by-case basis.

Why Is KYC Needed In Crypto?

Even though there are many crypto exchanges that question the need for KYC, there is a need for it in cryptocurrency markets. Currently, crypto assets are the riskiest for most financial institutions. In 2020 alone, over $2 billion was laundered through crypto. As such, most governmental entities are incredibly strict on cryptocurrencies, their mining, and their exchanges.

There are quite a few reasons why cryptocurrency poses such a big laundering risk. For example, cryptocurrency exchanges provide anonymous transactions, quick transaction speeds, structured transactions, and easy money muling. Criminals use cryptocurrency as a basis for their laundering as a result.

Although the KYC process does not change these facts about cryptocurrency exchanges, it does make it more difficult for launderers to launder their money through legitimate financial institutions. In other words, the KYC process makes it more difficult to launder cryptocurrency and easier to fight crypto fraud. 

KYC And Crypto Exchanges

The KYC process is more complicated when it comes to crypto exchanges. In crypto exchanges, the different financial institutions have to work a lot harder to establish their client’s identities.

The Financial Action Task Force recommends crypto exchanges use a risk-based approach when dealing with KYC compliance. This approach requires financial institutions to assess the risk of individual customers. From there, an anti-money laundering response will be implemented in proportion to the risk of the individual client.

Let’s look at an example to clarify any confusion. Let’s say that Person A is deemed high risk, whereas Person B is low risk, but both clients are using Crypto Exchange XYZ. Person A will have more extensive compliance measures applied than Person B. This further proves that KYC is tailored to each individual case.

Clashes Between KYC And Crypto Exchanges

Even though crypto exchanges certainly need KYC processes, many exchanges outright reject KYC. The main reason for this is that cryptocurrency users enjoy the anonymous nature of the currencies. Users also enjoy the blockchain technology that makes trading cryptocurrency easy.

With KYC, anonymity and speed are squashed to at least some degree. Countries like Switzerland and France have actually set identity requirements. France specifically has barred anonymous wallets outright. Furthermore, the KYC process builds up customer data and verifies key information. This further bars the goal of anonymity, even in countries where anonymous accounts are still legal.

Because the KYC process undoes some of the biggest benefits of cryptocurrencies, some crypto users are against the KYC process, even those that use cryptocurrency completely legally.

Ways Crypto Exchanges Avoid KYC

Due to the clashes between KYC and crypto exchanges, some crypto users have tried to avoid KYC processes. For instance, certain users will trade within companies and countries with less strenuous vetting. Even cryptocurrency firms have gone overseas for more relaced KYC rules.

What is Mining City?

Mining City is a platform that provides mining plans, giving users access to hash power and mining rewards.  Hashpower is the computing power needed to generate cryptocurrencies

Mining City users can buy crypto mining plans that give them access to hash power and mining rewards.  Hashpower provided by Mining City is used to mine Bitcoin (BTC) and other cryptocurrencies.

Does Mining City Have a Position on KYC?

Mining City takes its legal compliance obligations seriously and leaves banned markets and takes a compliant approach to new laws and regulations, adjusting to global markets. A good example of Mining City’s commitment to compliance is its recent implementation of KYC, AML, and other compliance check processes.

Cryptocurrency and crypto mining industries are new and gradually become more and more regulated markets. As new regulations go into effect, market players must adjust. They need also to react on any attempts in the Internet to impersonate them. That’s why Mining City has had to delete more than 500 scam profiles on social media. These profiles impersonate the founder of Mining City, Greg Rogowski, or Mining City itself across Facebook, Instagram, and even Skype.

Final Thoughts

Know Your Customer is simply a process of establishing a form of compliance amongst a financial institution’s clients. The main goal is to fight money laundering and illegal activities relating to cryptocurrency.

The Know Your Customer process involves different approaches to confirming your client’s identity, including identity verification, customer monitoring, and adverse media. Even though there certainly are downsides to KYC, it is needed if you want to monitor cryptocurrency money laundering. Many crypto exchange firms are going overseas to avoid KYC processes, despite having serious benefits.

Simply put, KYC is necessary to help mitigate crypto laundering. Just like other anti-money laundering techniques, KYC makes crypto fraud more difficult, thus making crypto assets less risky for financial institutions. Though it isn’t without drawbacks, the crypto markets are slowly embracing the necessity of KYC for legal and compliance reasons.

Via: https://themerkle.com

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