Although Know Your Customer (KYC) is a safe, legally required process on crypto exchanges, some crypto users still have concerns and misconceptions about it. Accordingly, these users opt for exchanges that don’t implement KYC (non-KYC) exchanges, such as DEXs like PancakeSwap.

Also, these users would be content with the minimal services that the KYC exchanges offer, neglecting to undertake the KYC and enjoy the full range of services on the platform.

So, in this piece, we’ll address these common misconceptions and concerns about KYC in crypto. Let’s dive in.

#1 Common Misconception: Privacy Concerns with KYC

As stated in our previous article, KYC “involves submitting a government-issued means of identification, proof of address and biometric data including snapshots, portrait video, etc.”

Consequently, some crypto users are concerned about uploading their private documents and biometric info to an exchange. Some users outrightly think these platforms may misuse this information or lose it to hackers in the event of cyber attacks.

For context, this is a legitimate concern of many crypto users. However, users should know that exchanges must comply with regional privacy laws for consumer data protection with serious violation penalties. Consequently, exchanges use extra encryption to secure users’ data.

#2. KYC Is a Complicated and Length Task

This is another common misconception crypto users have concerning KYC on exchanges. Some are confused about the process and view it as an arduous task.

In contrast, many exchanges make the whole process of KYC a short, seamless procedure. With all the required documents in digital format, the prompts and the directions make KYC hassle-free and swift.

#3. KYC Undermines Crypto’s Anonymity

In reality, KYC does not alter the anonymous nature of crypto transactions. Information uploaded during the process is required only to verify a user’s identity on the exchange while subsequent transactions remain anonymous.

KYC adds an accountability factor to crypto transactions on an exchange so that a miscreant does not dupe other users and get away with it.

#4. KYC Is Not Necessary

KYC complies with regional regulatory guidelines like Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) laws.

As stated in our previous article, “Due to KYC, regulators and investigators can now trace illegal funds converted to crypto and apprehend the party involved: AML achieved. The authorities can also freeze the crypto assets during ongoing investigations.”

So KYC is necessary to combat these vices which would have otherwise been more rampant.

In Conclusion

Implementing KYC protocols in crypto exchanges not only safeguards sensitive information but also ensures a secure and transparent trading environment. By addressing these misconceptions, users can confidently utilise regulated exchanges and access their full services.