Due to basic considerations like the nature of investment or the legislative frameworks governing a particular market, the KYC methodology for various financial markets differs. Today, there are developing markets with less stringent KYC standards than the norm, such as the crypto market.
There are varying opinions on whether KYC should be included in crypto ecosystems. On the one hand, authorities are urging the implementation of KYC regulations that are similar to those that already apply to financial markets. On the other hand, certain crypto stakeholders are adamant about protecting the value of anonymity and privacy. What does this mean for the future of KYC? Well, this is exactly what we’re going to explore in this article.
Debate On Crypto KYC
The decentralization and client anonymity declarations made by the cryptocurrency sector are well-known, and several cryptocurrencies provide a higher level of privacy than others. KYC, on the contrary, is renowned for being subject to a rigid set of standards by a centralized authority. It is also considered expensive in terms of the required compliance work.
Stricter Regulations On Crypto KYC
Although KYC has been a requirement for the traditional financial system for a number of years, the biggest participants in the cryptocurrency space have just lately made it a standard element.
For instance, following a string of legal disputes around the world in 2021, major exchanges have implemented a more stringent identification process for users. It goes without saying that there are still a lot of smaller exchanges that are able to avoid authorities’ scrutiny and ignore the global need for stricter KYC.
With stricter enforcement, things won’t be nearly as easy for crypto exchanges that are used to taking advantage of the grey areas.
Future of Crypto KYC
The need for KYC in the cryptocurrency industry is not anticipated to change. Nevertheless, there is a lot of disagreement on what should or might happen in the world of cryptocurrencies. In June 2019, the Financial Action Task Force amended its recommendations, demanding that nations make sure that crypto-asset service providers are subject to proper regulation, governance, or monitoring for AML and countering the funding of terrorism.
Furthermore, in situations when harmful activity involving the use of cryptocurrencies has taken place, it is not always possible to accurately determine the identity of the user. According to Chainalysis, it would be more advantageous to gather the wallet addresses of criminals rather than the personal data of all users.
Increasing KYC regulations will be introduced to the industry as crypto exchanges develop into recognised players in the global financial sector, whether the crypto community likes it or not. Additionally, a lot of crypto exchange platforms are advocating specific regulations, which will unavoidably require KYC, so that they may operate inside a clearly established legal framework.
All in all, a good balance for the development of the cryptocurrency ecosystem in terms of KYC will be to enable just enough transparency to track suspicious transactions without impeding the permissionless access that cryptocurrencies grant to the general public.
KYC undeniably plays an important role in an exchange’s security, and this applies to Flipster Cryptocurrency Exchange as well. Feel free to give Flipster a try if you’re interested in trading cryptocurrencies but aren’t sure which exchange to use. Users have access to a secure and exceptional trading environment through Flipster, a platform for trading crypto derivatives. Join Flipster now and execute your first transaction!
Disclaimer: Any opinion shared in this article is strictly the views and opinions of the author and should not be construed as financial advice. Flipster makes no judgment on the projects or the content uploaded.