Anyone who has invested in cryptocurrencies is aware of the tedious process of crypto exchanges verification of the account. First, it is necessary to substantiate the account by submitting all the required documents.
Yes, we know it is frustrating also because some exchanges don’t accept our photos, while some don’t take the documents because of some international standards. These things are annoying because we cannot place a trade after having all the genuine documents.
Why do crypto exchanges need identity verification?
Money Laundering of criminal activities is a big issue everywhere, and criminals always find the best ways to deceive people. The criminals know very well how to target people and empty their wallets.
The best thing they do for them is to target financial assets, bonds, etc., and sell them in the market. To prevent money laundering, crypto exchanges are adding a solid verification system to protect users’ accounts.
Still, criminals analyze these things very quickly and apply different tactics to deceive users’ accounts. That’s why the crypto exchange brings identity verification mechanisms through Know Your Customer and Anti-Money Laundering Checks.
What is KYC?
KYC stands for Know Your Customer, the first due diligence a crypto exchange must go through. New users must submit basic details about themselves, such as their name, address, country of residence, Date of Birth, and more.
But providing this information is insufficient, and that’s why users need to provide the documents of country of residence and other supporting documents confirming their identity. Moreover, once your identity is approved, the crypto exchange can offer you additional security to get your account protected from criminal activities.
What is AML?
Anti-Money Laundering is the second process after KYC that protects users from criminals. AML is there to show the income of a person from legal sources.
It is essential for the users who are trading with an income of more than $5000. The trading amount of less than $5000 doesn’t need to submit additional documents. But the people dealing with more than $5000 have to offer their income sources.
The users must show their income sources and total assets to prove that all of them were legally obtained.
It is essential to add these security features to the crypto exchange. If the exchanges ignore these regulations, they may need to pay severe penalties to US authorities.
Many other countries have implemented these regulations and tried making laws compatible with them. It doesn’t matter where the exchange is located; it is essential to implement all the rules. Users must follow the process to start trading, no matter how tedious.
How are Crypto Exchanges implementing identity verification?
Well, most crypto exchanges use a tier system to verify details. A user who wants to make more trade must undergo a strict verification process. Every tier has different requirements but users will also get more security and functionalities to their account. Let us know more about it –
Tier 0
First, users need to verify their email to access the functionality of the Crypto exchange. It only allows access to the platform, but trading, deposit, and swapping features are unlocked.
Tier 1
The next thing users need to provide is Name, Country of Residence, Phone number, and Date of Birth. To trade, these details are necessary to submit, but the withdrawal and fiat currency are still locked.
Tier 2
Next, users need to upload their national identity for verification. A passport is one of the common forms of identity accepted internationally. It opens money depositing options such as bank transfers, credit cards, etc.
Tier 3
Still, if users want to trade the amount of more than $5,000, then they have to submit a domicile. It needs to be recent and accurate and consists of country, state, city, and location.
Once it is done, the monthly capped amount will further expand, and it also depends on the jurisdiction of the crypto exchange.
Tier 4
It is the final tier, mainly for verified inventors with corporate accounts. Here, users must follow all KYC and AML guidelines, eliminating all the trading limits and allowing the Over Counter deal.
Conclusion
Identity Verification is one of the essential things for any crypto exchange that monitors illegal activities and prevents money laundering. We know it can be tedious, but it is necessary for everyone.
