In 2020, the EU’s Fifth Money Laundering Directive entered into force. In the directive, you can read about a number of procedures, measures and standards that will prevent money laundering in line with the anti-money laundering laws.
The procedures also apply to crypto exchanges . Many of the crypto exchanges experienced a large drop-out of customers, who did not want to take part in so-called KYC procedures. This is largely due to the fact that users wanted to remain anonymous.
What does KYC entail, and what exactly is the purpose of the process? Let’s take a closer look at the KYC process that many cryptocurrencies have now implemented.
What is KYC?
KYC stands for “Know Your Customer” and can be considered a collective term for standards and verification procedures in the financial industry. Using KYC protocols, companies can verify the identity of their customers.
The purpose of this is to be able to act in accordance with anti-money laundering legislation (also known as AML). By knowing who the customer is, for example, crypto exchanges and other parties can limit the chance that their services will be used for money laundering purposes.
Necessary to be able to withdraw money
Carrying out the KYC process is voluntary for users, but be aware that you will probably not be able to withdraw your values if you do not confirm your identity. This applies, for example, if you trade with eToro or Binance.
Implementing KYC is probably not a problem for the average crypto-investor, who probably has nothing to hide anyway. However, KYC will make it far less attractive for criminals to make financial transfers via crypto exchanges.
How to perform KYC?
Going through the KYC procedure may seem complicated or time consuming, but it is largely not. The various crypto exchanges generally provide a very clear explanation of how to proceed, step by step.
You mainly just need to upload the necessary documents requested by the crypto exchange. This includes, among other things, an proof of address, which can be an invoice sent from the public to your address.
You will also be asked to submit a photo of your passport or other approved proof of identity. Once the necessary documents have been submitted, the crypto exchange will start the verification process.
You will often be asked to take a picture of your face as well, so that the crypto exchange can see that you actually own the passport / identification card. Once the verification is over, you will be able to use the crypto exchange for both purchases, sales and transfers without restrictions.
A video that explains KYC quite simply:
KYC is usually part of the registration process
With most crypto exchanges, KYC is part of the registration process itself. This ensures that users have the opportunity to verify their user accounts as soon as possible after registration.
Usually the process does not take more than a few minutes if you have all the documents needed ready (passport, addressed letter…).
Register with a secure crypto exchange today
Do you want to be able to trade cryptocurrency and withdraw any cryptocurrency gains? Then you should register with a secure and reputable crypto exchange that has implemented the KYC procedure.
Among other things, we can recommend you to look at eToro or Binance, which are some of the most popular crypto exchanges for Norwegians.