Know your customer originated in the traditional financial sector. This was in response to anti laundering laws and ensuring that bank services are not being used for fraudulent purposes. In banks, the KYC guidelines stipulates that this process must be completed before the opening of accounts. Regardless of the absence of legal framework guiding cryptocurrencies and blockchain applications, KYC guidelines are being adopted my exchanges and indirectly by ICOs. Earlier in the year, the European Union mandated that only Cryptos and ICOS who have incorporated KYC guidelines will be allowed. To make this function, a task force was raised to develop the modality for enforcement.
Going back into history, KYC was introduced in 2001 as one of the response of the government to 9/11. Since then, KYC has undergone series of changes, part of which is now covering cryptocurrencies. The argument of many stakeholders is that fraud has always existed even before the coming of cryptocurrencies. The fear of many is the limiting of the freedom Cryptos has offered millions of users which will be inhibited by KYC/AML guidelines. Nonetheless many ICO and exchanges are already implementing KYC guidelines. ICOs like BullToken has made KYC an important part of their business structure. Individual investors are required to verify their identity by presenting verifiable ID information.
What’s In it For Crypto Firms
As major ICO players, incorporating the KYC guidelines allows for easy and seamless incorporation of regulations. The non-adoption will lead to difficulties in the long-term, it will affect the way crypto businesses are carried out. With KYC in place, ICOs and exchanges will develop an understanding of a customers’ transaction patterns. This will be beneficial to both the customer in the event of hacking and the exchange, as they will be able to determine what seems like a suspicious transaction.
With ICOs like BullToken which is expected to be community of investors implementing KYC in their business structure. They are proving their level of responsibility as a Crypto start up compliant with existing laws. For every member of the BullToken community, they would have gone through a thorough scrutiny of their identity. This is to ensure that the platform is not being utilized for money laundering and other criminal activities. Aside that, being a community of shared interest, there will be individuals who will want to solidify and back their own investment proposals using multiple accounts. KYC will limit such behaviors as individuals will be able to create account and buy tokens using their identity only.
In reality, KYC will be doing Crypto communities a lot of good as regards identity and social credibility. It will go a long way to rid exchanges of fraudsters who are already disrupting the decorum of many exchanges.