KYC stands for “Know Your Customer” and is the process of a business identifying and verifying the identity of its clients.
As more and more cryptocurrencies are introduced into the market, governments around the world have become more vigilant in regulating digital currency transactions to prevent money laundering and terrorist financing. This means that all entities engaged in exchanging between virtual and fiat currencies are required to carry out customer due diligence (also known as KYC), monitoring and reporting suspicious transactions.
The information needed for all transactions can include details such as full name, address, citizenship, bank statements, utility bills, a photo with a certain code etc. This might sound complicated to some customers and annoy others, but such information protects companies from unwittingly facilitating money laundering, terrorism, and corrupt acts.
There are several grades of KYC with an increasing amount of private information required for disclosure. Some platform operators for cryptocurrency do not ask for any details whereas others require users to capture a clear image of them holding their ID card or a piece of paper with your date & signature. For more details, check out the “Guide to regulating Cryptocurrency via the “KNOW YOUR CUSTOMER“ (KYC) Procedure and Compliance”.
Now that you better understand the KYC process, you can also better comprehend its importance.
If you are interested in reading more about the legislation regarding cryptocurrencies in the EU, follow this link.