Key Insights
KYC is very important for verifying the identity of users before using a crypto platform.
It is a regulatory requirement and the Indian government both demands and requires it.
The process helps to protect users, reduce fraud, and scams as well as prevent money laundering.
Indian citizens need documents like an Aadhaar card, a PAN card, a passport photograph, and proof of address depending on the exchange.
KYC registration generally takes between 10 - 30 minutes and is very easy to complete.
Almost everyone in the crypto industry has heard of KYC at some point.
This word is an abbreviation for "Know Your Customer."
It is mostly used by centralized exchanges and is a major requirement for making sure that both the user and the crypto exchange in question remain safe.
For those looking to open an account in any crypto-related platform in India, completing KYC procedures is non-negotiable.
Let’s see what this process is and why it is so important.
Understanding KYC
KYC isn’t just something these platforms “choose” to demand. Instead, they have to by law.
This process is a regulatory requirement that helps companies verify the identity of their customers.
Think of it as a major process that makes sure every user is who they claim to be.
For crypto exchanges, KYC helps maintain compliance with legal frameworks. It also reduces the risk of illegal activities like money laundering, fraud, and terrorism.
The procedure involves submitting personal identification documents before opening an account and making transactions.
Upon submission, the exchange also has to make sure that these documents are valid.
In the event of need, they can help to confirm things like identity, address, and even financial standing sometimes.
This way, everyone involved has a reason to play by the rules: Because any rule-breaking means that the perpetrators can easily be tracked down.
Why is KYC Important for Crypto Exchanges?
Crypto has become massively popular in India. However like most other great human inventions, the chances of scams and fraud have skyrocketed as well.
This is where KYC steps in. Here are some major reasons why this process is important for crypto exchanges:
1. Legal Compliance
This is the first and most obvious. Just like their customers, crypto exchanges also have to obey a set of rules.
These rules (often called regulations) are a legal framework set by the Indian government (and sometimes external bodies).
All of the above means that crypto exchanges simply cannot operate without making KYC mandatory.
Regulations like these make sure that crypto exchanges adhere to what is known as Anti-Money Laundering (AML) guidelines.
Without KYC, these platforms would both be in a world of trouble with the Indian government. Its users themselves could also be exposed to massive risk.
2. Protecting Users
Another major reason for this is that KYC prevents “anonymous accounts” from engaging in illegal activities.
Most bad actors in the crypto space like to launder money and finance terrorism from the shadows.
KYC prevents this from happening.
Moreso users knowing that every account on an exchange has been verified helps build trust. It also does much to reduce the chance of scams.
3. Reducing Fraud and Scams
The crypto industry is no stranger to things like Ponzi schemes, phishing attacks, and fraud.
Proper registration via KYC significantly reduces this risk. It also plays an active role in discouraging bad actors from using a platform.
Scammers often thrive on anonymity and KYC forces them to reveal their identity.
It therefore becomes significantly harder to scam honest users when their identity is only a button click away.
Documents Required for KYC in India
This brings us to the next step. What does a person need to complete KYC verification in India?
Here is a full list of the most commonly required documents:
Aadhaar Card:
This is a unique identification card issued by the Indian government. It serves as a one-in-all proof of identity and address.
PAN Card
PAN is an acronym for “Permanent Account Number”. It is mostly used for tax purposes and might be required by an exchange.
Proof of Address
If an Aadhaar card doesn't have an up-to-date address, this document comes in.
You may also need to provide another form of proof like a utility bill or rental agreement.
Passport Photograph
Last but not least, the passport photograph comes in. Aside from the Aadhar card, a passport photograph is one of the most straightforward means of identifying a person.
Some exchanges even ask for a selfie to make sure that the face of a user matches that of the passport photograph they submit.
How KYC Protects Against Scams and Fraud
All of the above explains how important KYC is.
But “HOW” does KYC protect users exactly? Here’s how:
Prevents Identity Theft
Most of the world’s fraud cases often arise from stolen identities.
By thoroughly verifying a user’s identity, this process reduces the chances of someone using a stolen ID to open an account and commit fraud.
Limits Money Laundering
The documents submitted during KYC verification also make sure that funds are always traceable. This makes it significantly harder for money launderers to use crypto exchanges for their means.
Creates Accountability
If someone commits fraud on a KYC-compliant exchange, authorities can easily trace their activities back to them.
A Quick Guide To KYC On Binance
Binance is one of the most popular crypto exchanges in and around India.
This exchange with millions of users follows strict KYC procedures.
If you're considering KYC on Binance-India, here's a step-by-step guide for you.
Sign Up
Signing up is easy to do. Simply create an account using your email address and set up two-factor authentication for added security.
Submit Documents
Upon signup, you will need to upload the required identification documents. These have been covered in one of the previous sections and include your Aadhaar card, PAN card and a recent photograph.
Face Verification
After completing the aforementioned steps, Binance may then ask for a selfie or a live video. This is typically done to match your face with the documents.
Wait for Approval
Registration processes usually take a few hours to a few days. Once approved, Binance will notify you via push notifications or email and you can start trading.
In summary, KYC is a lot more than a mere formality.
It is an important security measure that protects both users and the exchanges themselves.
Whether you’re a beginner or an experienced crypto user, don’t worry about the process being tedious as it only takes a few minutes.
Happy trading