26 Jan BREAKING: Are KYCs Making the Crypto Market Unfair?
KYC – Know Your Customer: for the security of the business and the customer – but how safe is it really?
KYC verifications are becoming more common in the crypto world. Already common practice in the financial world, KYCs check the customer’s identity and verify that the customer isn’t involved in any illegal activity. The crypto market has been fraught with scandal in the past, so performing a few basic checks on who’s using what and where the money is coming from couldn’t hurt, right?
Wrong. At least, that’s what those who feel KYC defeats the decentralized purpose of crypto think. Where is the anonymity if you have to send multiple IDs, bank statements, and numerous other personal information to a central body?
In reality, many cryptocurrencies are actually pseudo-anonymous. Even without a KYC, there are ways of tracking identity. A KYC is simply meant to add that extra step of security.
KYCs are also beginning to be applied to ICOs. There are many reasons for this, some of which include potential prosecution by the SEC or being excluded from a major crypto exchange for not having a KYC.
The reality of imposing a KYC to something like an ICO or crypto exchange is that your application to sign up may be rejected. Potential, legitimate, reasons a KYC may get rejected could vary anywhere from the country you live in being one that is known to support terrorism, your name coming up in relation to illegal activity, or something not adding up on your ID (such as it’s expired, or your name doesn’t match across all documents submitted).
With the growing amount of KYCs, fears have grown too. Can a KYC be used as a means of stealing a person’s identity? Can a KYC be used as a way to discriminate against someone? There has been talk of both and the fears are valid, if not necessarily based in truth.
It can be a little unsettling handing over your personal information, especially in the case of the still mostly unregulated market of crypto. The question of legitimacy can be a little harder to answer when you can’t tell what’s for real and what’s a scam.
Then there’s the issue of rejection. Recently, Dether opened up its KYC registration for its upcoming ICO in February. The only way to participate in the Dether ICO is to be approved through the KYC that Dether has set up. The information the KYC is asking for is pictured above. There were several complaints of being rejected by Dether’s KYC, with little reason given as to why. This led to some questions about the fairness of KYCs: is a KYC capable of blocking a certain group of people from participating in an ICO or the greater crypto market?
It could just be that Dether got overwhelmed by the number of KYCs it had to process and so had to consequently reject many of them for no other reason than not enough time. Many ICOs are, after all, run by a small team.
Take a look at some of the information that is being asked for: nationality; profession. Both valid inquiries, but are they absolutely necessary? For security’s sake, maybe. It does, however, mean that companies using KYCs should be careful in providing a valid reason for rejecting an application. Otherwise, somebody might jump to conclusions that never existed in the first place.
What’s your take on crypto KYCs? Are they fair? Or are they causing more problems than they’re solving?
Feauture image: Depositphotos