The Importance of KYC in Cryptocurrency
February 3, 2021
Things move quickly in the world of cryptocurrency and the value of assets like Bitcoin have recently risen to their highest price in years.
When markets experience price hikes of the like we’ve seen recently, savvy investors want instant access to the party. But, how can you ensure your potential customers are up and running on your platform as quickly and efficiently as possible?
The World of Cryptocurrency
Cryptocurrency has long been a volatile market, with rises and falls of 40% or more in a matter of days not uncommon and current affairs that seemingly have nothing to do with cryptocurrency can have an effect on the share price. Cryptocurrency has been seen as an alternative to traditional (fiat) currency, so when investors lose their confidence in a fiat currency because of economic or political events, they can turn to bitcoin or its rivals, pushing up the price.
However, there are instances of current affairs having a positive effect on both crypto and fiat currencies; when it was announced that Joe Biden had won the race to become the next President of the USA for example, financial markets around the world rallied with global shares reaching record highs. The same can be said for crypto value as Bitcoin soared to its highest level since January 2018.
The price of bitcoin jumped again recently after Elon Musk said it is ‘a good thing’ in comments broadcast on social audio app Clubhouse. He also changed his biography on Twitter to ‘#bitcoin’ and the price surged to over $38,000, its highest ever value.
With volatility comes opportunity and some savvy investors have capitalised on massive gains over the years. We recently explored what drives these price changes, but cryptocurrencies have been on an upward trajectory for some time now…
Onboarding Cryptocurrency Customers
When markets experience price hikes of the like we’ve seen recently, savvy investors want instant access to be able to buy and sell through exchanges. Onboarding means taking these potential customers and turning them into active users of a product or service, but regulations are changing all the time and businesses dealing in crypto assets must be prepared to move swiftly, adopt new standards, and protect their business from regulatory scrutiny.
KYC, or performing customer due diligence (CDD), should be performed regardless of whether AML regulations are applicable to ensure customers are who they’re claiming to be. Money laundering has ballooned worldwide and as we investigated recently, illicit activities have been steadily increasing in cryptocurrency. To stay ahead of regulators, exchanges should add identity verification services to different points within their environments, to help reduce money laundering and meet compliance standards.
Implementing KYC processes help financial institutions get a handle on this international pandemic. KYC is the initial customer due diligence stage in AML onboarding checks and as crypto exchanges and wallets become more like financial institutions, KYC needs to be added into the AML programs for these entities.
Employing a robust and efficient KYC process will:
- Build trust and transparency with customers.
- Lower the risk of financial crime.
- Build trust and confidence between customers.
- Help to stabilise the crypto market.
- Keep exchanges and custodial service compliant.
Many businesses make the mistake that onboarding ends when a user signs up for a paid subscription of their product. The more a business knows about their customers, the more they not only build further trust within their brand but can tailor customers experiences to expand loyalty, improve overall customer lifetime value and obtain revenue retention. As smart business strategy, not knowing your customer in today’s financial world is a non-starter.
How We Can Help
One thing you can count on in the world of crypto compliance and regulation is how unpredictable it is and with wider adoption of cryptocurrencies, businesses need to make sure their onboarding process is robust, compliant and efficient.
Here at Acuant, we provide a range of solutions and specialise in cryptocurrency KYC checks. We offer global verification that takes seconds and all of our solutions are available via our single API, Sodium.
Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you to learn more about your customers.