While the concept of anonymity was once a fundamental aspect of crypto trading, the entire industry is now gravitating toward standardized regulations. In many cases, staying on the light side of crypto benefits, not least, the users themselves.
In this post, we will delve into KYC (Know Your Customer) procedures, explain why LCX has chosen to implement them, and outline the steps we take to ensure a seamless user experience.
KYC in plain English
Know Your Customer, or KYC for short, is a process employed by financial organizations to confirm the identities of their customers. Originally created for banks, KYC is now used in the crypto industry as well. The goal for KYC in crypto is also the same: preventing illegal activities like money laundering and terrorism financing as well as increasing transparency and security.
Note that KYC is not a rule initiated by certain crypto platforms; it’s a legal requirement from state authorities of countries where those platforms operate (so-called AML legislation). Not following the rules can lead to serious penalties for a provider, even criminal prosecution.
To complete KYC verification, customers need to provide their name, address, birth date, telephone number, and government-issued ID: usually a passport, a national ID card, or a driver’s license. There’s also a requirement for a biometric check, typically done by capturing selfies. Once verified, users can go ahead and use crypto services: buy, sell, or lend crypto.
Here’s an example of how this is done on the LCX platform:
Are there benefits for a user to verify their identity?
Absolutely. Let’s take a closer look at the pros of verifying your identity versus staying anonymous.
Enhanced security
When you verify your identity, you provide crypto platforms with essential information to confirm your legitimacy. It helps you protect your assets and personal information from unauthorized access or theft. This also makes it harder for malicious actors to impersonate you, and you’re less likely to become unintentionally involved in illegal transactions.
As a result, you can trade, invest, and transact with greater peace of mind, knowing that your account is better shielded against potential threats.
Improved user experience
While anonymity (pseudo-anonymity, in fact) has its allure, it often comes at the cost of user-friendliness.
Let’s take decentralized exchanges (DEXes) as an example. The distinctive feature of DEXes is that they operate on an on-chain approach. This means that users can trade without having to disclose their personal information, but rely on the transparency of blockchain technology.
However, users need to be crypto-savvy and well-versed in the intricacies of blockchain transactions to navigate DEXes successfully. Without the safety nets of centralized exchanges and verified identities of every counterpart, users may find it challenging to avoid irreversible mistakes.
By confirming your identity, you gain access to a wider range of user-friendly services and platforms, such as LCX, making your crypto journey smoother and more accessible, even if you’re not a tech-savvy person.
Lower risk of fraud
The fact is that decentralized platforms, along with freedom, carry much more risks related to fraud schemes. One of them is “rug pull,” which we wrote about recently.
When users verify their identities on reputable crypto platforms, they add an essential layer of protection against these fraudulent operations. This verification process helps deter fraudsters from using the platform to carry out their schemes, as their identities would be exposed. It also allows for better tracking and accountability, making it more challenging for malicious actors to disappear with investors’ funds.
In essence, verifying your identity not only reduces the risk of fraud but also acts as a deterrent, making it less attractive for criminals to engage in fraudulent activities within the crypto space.
How LCX approaches KYC
At LCX, our foremost priority is to ensure the highest standards of security and regulatory compliance. KYC is a pivotal element of this commitment, and we’ve taken comprehensive steps to make it a seamless and user-friendly process for our customers.
In the pursuit of world-class identity verification, LCX has partnered with Regula, a trusted leader in identity verification technology. This strategic partnership has supercharged the speed and accuracy of processing of the ID documents our clients submit. Thanks to Regula’s tried and tested technologies, the verification process now takes seconds. This means you get to start operations with crypto assets without any unnecessary delays.
Our dedication to maintaining regulatory compliance is also exemplified by our impressive track record in Liechtenstein, where LCX has been granted nine out of the eleven available crypto-related licenses. The latest achievement in this area was gaining regulatory approval as a Physical Validator according to the Liechtenstein Blockchain Act (TVTG).
This comprehensive regulatory coverage reinforces the position of LCX as a fully compliant and secure cryptocurrency exchange, and also contributes to a safer crypto ecosystem as a whole.
