What Is The Significance Of KYC And User Verification In The Crypto Industry?

Security companies forge partnerships with crypto companies to audit their customers or the exchanges themselves ask their customers to complete the KYC procedure.

What Is The Significance Of KYC And User Verification In The Crypto Industry?

Exchanges ask their potential customers to complete KYC before starting trading on their platform

The cryptocurrency industry has shown growth at an unprecedented rate over the past two years. Its rapid growth has attracted several investors. Given the digital nature of the industry, many hackers and people with intent to con others too joined it. In fact, scammers are getting into the industry to defraud unsuspecting users at an alarming rate.

As the market progresses, the scammers too are improving their skills. To ensure transparency and curb incidents of fraud, blockchain security companies began auditing users and also asked them to complete a KYC. This reduced the number of con artistes operating in the industry.

But who are these security companies and how do they audit or do a KYC?

These security companies forge partnerships with major crypto companies to audit their customers or the exchanges themselves ask their potential customers to complete the KYC procedure. In India, there is no government regulation of the cryptocurrency industry. So some crypto exchanges have deployed their own Know Your Customer (KYC) and auditing procedures to counter dirty money from entering the market via their platforms.

Exchanges like CoinSwitch Kuber ask their potential customers to complete KYC before starting trading on their platform. For KYC, CoinSwitch seeks PAN or Aadhaar card and asks the user to upload a selfie on its app. Similarly, WazirX, another cryptocurrency exchange operating in India, says it has deployed a “top of the line” identity verification tool to process KYC within a few hours of signing up.

Others too have developed tools to verify their customers' identity and also insist that the money that enters the market must come from the users' bank account and not some third-party bank account.

Some exchanges use the “penny drop” method to process KYC, meaning they transfer a token amount of Re. 1 to the user's account to ascertain their account details. They may seek additional documents for corporate clients and those who seek higher transaction limits.

The exchanges also deploy high-end security software to immediately block a user if they suspect they are compromising their security guidelines.

.