1. What is KYC? Why is KYC required when trading on Binance?
In the cryptocurrency market, with its security and anonymity features, the purpose of its creation is to ensure privacy and cross-border transactions. But with the development and popularity of the crypto industry, many types of criminals have taken advantage of it to commit fraud and illegal acts. In 2023, the value of crypto transactions received from illegal addresses was $24.2B, a terrible number (statistics from Trend Micro)
Cryptocurrencies have been the subject of numerous allegations of money laundering, fraud, drug dealing, and even terrorism financing. These issues have led to the intervention of lawmakers, forcing them to regulate the cryptocurrency market. KYC (Know Your Customer) regulations have become essential for cryptocurrency companies to properly screen and verify the identity of their users.
Currently, compliance and implementation of KYC procedures are mandatory for all exchanges in the cryptocurrency sector. Currently, non-custodial wallets that do not require KYC still dominate the crypto market for asset storage, however, the US has taken the lead by finalizing a bill that requires all crypto asset holders to perform declaration and KYC.
2. The importance of KYC in crypto
The Importance of KYC in Crypto
a. KYC enhances user trust: Implementing KYC helps to enhance trust between users and exchanges. When people see that KYC requirements are met, they feel confident about the credibility of the users. This not only creates a transparent market but also encourages users to continue using the services and products provided by the exchange.
b. KYC reduces cryptocurrency-related crime:
- In 2023, 0.34% of total cryptocurrency transaction volume was identified as illegal. The highest reported rate of illegal transactions during the 2017-2022 period was in 2019: 1.9% percent. In 2023, revenue from cryptocurrency scams and hacks decreased significantly, with illegal revenue from scams decreasing by 29.2% and hacks decreasing by 54.3%
- Since 2020, FinCEN (Financial Crimes Enforcement Network) in the United States has required cryptocurrency exchanges to comply with regulations related to anti-money laundering (AML) and counter-terrorism financing (CFT). In which, KYC is considered the first and most important step.
- Immediately after the above laws were enacted, in 2020 the rate of illegal cryptocurrency transactions dropped to 0.43%, which is a clear demonstration of the effectiveness of KYC regulations in preventing crimes in the cryptocurrency sector.
-> By limiting illegal activities, exchanges can minimize legal risks, save time, and focus on more sustainable growth strategies.
c. KYC helps stabilize the crypto market: The crypto market is extremely volatile, many coins are traded on DEX exchanges (not guaranteed by any party), anyone can add liquid to the trading pair, every day there are tokens that are pumped/dumped thousands of times not due to community FOMO but due to anonymous transactions and price manipulation. As long as you buy, you will become an "unwilling liquidity provider". When exchanges comply with KYC regulations, identity verification becomes easier, helping to eliminate bad elements and bring stability to the entire market. This not only helps protect users but also creates a safer trading environment, promoting the long-term development of the cryptocurrency industry.
3. Binance KYC Process
You can read the KYC guide from Binance FAQ here: https://www.binance.com/en/support/faq/how-to-complete-identity-verification-for-a-personal-account-360027287111
Identity verification is a mandatory step if you want to participate in asset (cryptocurrency) trading on Binance. Users who have not completed KYC can only access basic features such as receiving NFTs, Fan-tokens and Gift Cards, but cannot trade.
Binance's KYC process is divided into three levels: Intermediate, Advanced, and Professional. Specific requirements may vary by region, but in general, the process includes:
a. Collection and verification of personal information: Users are required to submit valid government-issued identification documents.
b. Real person authentication: Compare the user's facial image with the provided documents.
c. Check information via World-Check Risk Intelligence: Verify users against a database of high-risk individuals.
Users in regions that require proof of address must provide valid address information to fully access Binance. Others only need to provide proof of address if they want to increase their withdrawal limit from $50,000 to $2 million.
To request increased deposit and withdrawal limits, users must declare the source of their assets and whether they are linked to politically exposed individuals (PEPs). Binance's KYC policy is considered one of the strictest in the industry, demonstrating its commitment to protecting users and the ecosystem.
4. For users, performing KYC is not only an obligation but also a way to protect themselves from risks. KYC is an essential part of the cryptocurrency trading environment, especially in developing markets like Vietnam. This process not only helps exchanges comply with legal regulations but also protects users from fraudulent and scam activities. By implementing strict KYC, exchanges like Binance not only maintain a secure platform but also contribute to the sustainable development of the cryptocurrency industry.
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