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Cryptocurrency KYC [why it matters]

There’s no escape from KYC in the world of finance and banking operations. For the newbies out there, KYC means Know Your Customer. It is a mandatory process for identifying and…

The post Cryptocurrency KYC [why it matters] appeared first on Cryptocoindude.com.

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There’s no escape from KYC in the world of finance and banking operations. For the newbies out there, KYC means Know Your Customer. It is a mandatory process for identifying and verifying customers the world over. In this post, we will give an overview of what KYC is, where it came from, the difference between KYC and AML, why it’s important and what you may need to provide and we’ll take a look at KYC and digital cryptocurrency exchanges. Without further ado, let’s dig into ‘Cryptocurrency KYC [why it matters]’.

Table of Contents

Why introduce KYC?

KYC laws were introduced in 2001 as part of the Patriot Act which was passed after 9/11 to provide a variety of means to deter terrorist behaviour.

By first verifying customers’ identities and intentions and then understanding their customers’ transaction patterns, financial institutions are able to more accurately identify suspicious activities.

Terrorist financing and money laundering often rely on anonymously opened accounts, and the increased emphasis on KYC regulation has led to increased reporting of suspicious transactions.

Regulations are becoming stricter, meaning financial institutions have to spend more money to comply with them—or be subjected to steep fines.

KYC in the cryptocurrency sphere is something that is increasingly important as the industry matures

KYC and AML: What’s the difference?

The AML concept is much broader than KYC. AML stands for Anti-Money Laundering and refers to a set of policies, laws, and regulations to combat generating income in a fraudulent way.

An AML program may consist of the following:

  • KYC procedure: Customer Due Diligence (CDD) and Enhanced Due Diligence(EDD).
  • Risk-based AML policies
  • Ongoing Risk Assessment and Ongoing Monitoring,
  • AML compliance training programs for staff
  • Internal Controls and Internal Audits

Why does KYC matter?

Cryptocurrency KYC is a manual process that includes physical verification of document scans. It is important because it makes sure that the customer and the information provided by them are real.

KYC and digital exchanges

While some people may see anonymous trading as a feature of the cryptocurrency market, it can also enable problematic business practices and criminal or terrorist activity. Anonymity in the wrong hands can be a dangerous weapon.

In essence, the cryptocurrency KYC process for digital exchanges and banks is the same. It always requires proof of identity (POI), proof of address (POA), and other relevant information for verification. However, the actual steps included in the process may differ from exchange to exchange

Cryptocurrency exchanges can request or accept different types of IDs, ask to sign different forms, and include different procedures overall.

OK, I know KYC is my friend, but I still want options on no KYC needed digital exchanges…

There are several bitcoin exchanges on the market which allows you to use the services without verifying your identity. This means that during registration no personal details need to be provided. At an anonymous bitcoin exchange, most of the cases you just need to provide an email and a password and you can trade instantly.

A limitation (depending on your viewpoint on the subject of KYC) of anonymous crypto exchange platforms is they apply a threshold for unverified users both in terms of trading volume and daily or lifetime withdrawals. This can cause a potential problem to those who would like to engage in trading activity anonymously with a high amount of funds.

Exchanges that offer no KYC options include:

PrimeXBT.com Bitmex.com Livecoin.net  HitBTC

***At cryptocoindude.com, we’d always recommend a regulated exchange that offers robust KYC and AML as this offers a piece of mind that is hard to put a price on.***

OK… which documents do I need?

The most important documents for submission are proof of identity and proof of address.

The following documents are generally accepted as proof of identity:

  • Passport;
  • Driving license;
  • Voter’s Identity Card

When it comes to proof of address, the documents that can be submitted are as follows:

  • Passport;
  • Utility bill, e.g., telephone bill, electricity bill, gas bill;
  • Bank account statement with signature verification;
  • Letter from employer, bank manager of scheduled commercial banks

*** TOP TIP – Always have up to date documentation saved in the correct format ready to upload to pass KYC. Passing the checks in one attempt is the best way to reduce the frustration of back and forth’s between the platform’s support team***

What happens after verification?

KYC updates also include monitoring customer transactions, which is an essential element of the KYC policy. Why is it done? To be able to differentiate between normal and suspicious customer behaviour in the financial sector, this behaviour needs to be analysed in the first place. It’s better done through transaction monitoring.

Some problems with KYC

Given the cost of instituting KYC/AML, startups and smaller companies are often the ones who suffer the most. A company that cannot afford to dedicate funds toward KYC/AML regulation, in many cases, will not receive licensing.

Cryptocurrency KYC [why it matters] final conclusions

KYC/AML at the moment acts as a double-edged sword. Implementation has the ability to attract investors who are sceptical of the security in the crypto industry. However, they also can limit innovation altogether by restricting licensing to companies which cannot afford the cost of KYC/AML upkeep.

In an increasingly regulated space, KYC will become increasingly used as the standard when using platforms the most notable thing KYC does is provide the crypto industry with some much-needed maturity. Decentralised trust will be the cornerstone of peer-to-peer shared economies of the future.

Source: https://cryptocoindude.com/cryptocurrency-kyc-why-it-matters/?utm_source=rss&utm_medium=rss&utm_campaign=cryptocurrency-kyc-why-it-matters

Blockchain

Members of WallStreetBets Forum Alleged in Telegram Crypto Scam Stealing $2M in BNB and ETH

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Members of the popular WallStreetBets Reddit forum were suspected of a presumable cryptocurrency fraud that could have caused losses of no less than $2 million. By creating a designated Telegram group, they duped investors by guaranteeing remarkable returns through capitalizing on the recent crypto market rally.

The Core of the Hoax

Per a report by Bloomberg, alleged members of the WallStreetBets Reddit Forum used the Telegram messaging service to execute a blatant scam. A particular account by the name of ”WallStreetBets – Crypto Pumps” presented users the chance to purchase a new token certified as WSB Finance before it was listed on crypto exchanges. The operation is known as a pre-mine sale.

The essence of the fraud was connected to the recent cryptocurrency boom as bitcoin and most altcoins skyrocketed in value lately. With some of the digital assets reaching 1,000% gains, the targeted WSB members conned investors into sending money without asking questions and with the potential of netting huge profits.

The notorious account also urged users to transfer popular cryptocurrencies such as Binance Coin (BNB) and Ethereum (ETH) to a designated crypto wallet and then to reach its ”token bot” to gain WSB Finance coins.

However, the perpetrators never dispatched those coins. Furthermore, another message on Telegram revealed that the people who had already issued a payment had to send an equivalent amount again or they would risk losing their initial investment.


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The Aftermath

After executing the hoax, more than 3,451 Binance Coins were withdrawn on Tuesday (May, 4th) from the wallet inside the Crypto Pumps messages.

Since the price of BNB at that point was approximately $625, the fraud caused losses of more than $2.1 million. Following the scam, thousands of people expressed their frustration and tried to expose the individuals behind the account. Moreover, the quantity of the other cryptocurrency – ether – still remains a mystery.

Two weeks ago WSB admins warned about offers that might try to take advantage of the forum’s name in order to allure the crypto audience. The ”WallStreetBets – Crypto Pumps” account has been removed from Telegram but whoever managed it left a message that might stun the affected victims:

”Buying Lambo now.”

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Source: https://cryptopotato.com/members-of-wallstreetbets-forum-alleged-in-telegram-crypto-scam-stealing-2m-in-bnb-and-eth/

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Blockchain

South Korean Crypto Exchange Accused Of $1.5 Billion Scam

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The South Korean cryptocurrency exchange platform V Global was accused of luring 40,000 people into illicit multi-level deceit. The entire scheme amounts to more than 1.7 million won, which equals $1.5 billion.

The Investigation

As reported by the Korean officials, the police raided many places in the country related to a virtual cryptocurrency exchange, and its notorious CEO – known as LEE – alleged to fundraising without regulatory permission. The authorities blocked the exchange’s cash deposits as a part of the investigation.

In total, the Gyeonggy Nambu Police Agency reported that it searched the exchange’s headquarters in southern Seoul along with 21 other places and froze more than $214 million left in the account.

Another report from today shed more light on the developments. According to Yonhap News, the name of the organization is V Global. The Korean police are examining the accusations against them for fraud under the Certain Economic Crimes Weighted Penalty Act, the Similar Receiving Act, and the door-to-door sales business.

The main accusation against the exchange is gaining a deposit of 1.7 trillion won ($1.5 billion) from 40,000 members in the period between August 2020 and January 2021. The announcement revealed that most of the people were elderly or housewives with no experience in cryptocurrency trading.


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Too Good To Be True

The investigation revealed that the exchange urged investors to entrust their funds to an account and lured the members that the expected return would be three times higher than the initial investment. According to the authorities, there was a pyramid element in the scam as the exchange promised to grant an introduction fee of 1.2 million won ($1,065) for every newly recruited member.

The report affirmed that the trading venue paid some members in the form of a block. Therefore, people who signed up earlier received funds from individuals who entered the exchange later.

Moreover, the Korean police seem confident to deal with the fraud case as it revealed its intention to confiscate 240 billion won ($214 million) left in the V Global account as of the 15th last month, even before the prosecution process.

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Source: https://cryptopotato.com/south-korean-crypto-exchange-accused-of-1-5-billion-scam/

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Georgia’s central bank is exploring ‘Digital Gel’ CBDC

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The National Bank of Georgia said that it is considering launching a central bank digital currency.

In an announcement today, the central bank hinted at the issuance of a central bank digital currency, or CBDC, in an effort “to enhance efficiencies of the domestic payment system and financial inclusion.” The National Bank of Georgia, or NBG, said it would be inviting fintech firms and other financial institutions to participate in the project, named Digital Gel after the symbol for the country’s fiat currency, the lari.

“CBDC holds the promise to unlock the tremendous value of innovative business models for the benefit of society,” said the announcement. “The introduction of CBDC could increase financial intermediation efficiency, help introduce new financial technologies, facilitate financial inclusion, and reach previously unbanked populations.”

However, the bank mentioned the possibility of risks in the launch of a CBDC in the Republic of Georgia given the “new and potentially disruptive technology.” The NBG said it may conduct extensive testing of the CBDC in a controlled environment to ensure a smooth rollout, but did not provide any details regarding a timeline for launch.

With a population of roughly 4 million and a gross domestic product of approximately $15 billion, a nation like Georgia falls at the smaller end of countries exploring CBDCs. The Bahamas officially rolled out its Sand Dollar central bank digital currency in October, while China has been piloting its digital yuan in select cities prior to a full-scale launch. In the United States, Fortune 500 company Accenture announced this week it would be partnering with the Digital Dollar Foundation to conduct CBDC trials.

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Source: https://cointelegraph.com/news/georgia-s-central-bank-is-exploring-digital-gel-cbdc

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