Cryptocurrencies have never been more mainstream in India than in the past two years, with mostly investors, retail, depositing billions of rupees to own digital assets.
This comes amid a sharp rally in virtual currencies in recent years. However, financial regulators around the world, including in India, have warned against misuse of decentralized currencies and platforms.
According to market research firm Chainalysis, India became the second-highest country in crypto adoption, and given the current view, experts believe India may well see the world stage in 2022 in diverting utilities from the decentralized disruption, provided the government takes measures. a progressive regulatory stance. Today, India already has nearly 15 million crypto investors.
India’s Reserve Bank of India (RBI) even went on to say that the cryptos have no underlying asset, not even a “tulip” worth. The central bank has also warned of damaging consequences for financial and macroeconomic stability. Due to the anonymity factors, as exchanges would not track the transactions, regulators have also warned against misuse of crypto platforms for terrorist financing and money laundering.
In the wake of this, crypto platforms are increasingly asking their customers to enter Know Your Customer (KYC) data, even though crypto services are intended to be decentralized.
What is KYC and is it important for crypto trading?
KYC means ‘know your customer’, which is an effective way for an institution to confirm and thereby verify the authenticity of a customer. This requires the client to submit all KYC documentation before investing in various instruments. Usually, financial institutions are mandated by the RBI to perform the KYC process for all clients before being given the right to conduct financial transactions. Whether the customer uses KYC online verification or opts for offline KYC, this is a simple one-time process.
When it comes to KYC for crypto trading, although it is not mandatory for investors to perform the KYC process for crypto trading, more and more crypto exchanges and platforms are moving towards asking them to complete KYC.
Essentially, many decentralized services are designed to allow customers to remain anonymous and keep their personal information private from any central authority. This means that many crypto companies cannot identify who their customers actually are; something that regulators find unacceptable.
Even the most reluctant crypto companies have been forced to implement increasingly strict KYC measures as they face mounting pressure and punishment from regulators. For example, crypto exchange Binance announced in August of last year that new customers would have to present a government-issued ID and pass facial verification to make deposits and transactions.
Done with KYC can help investors settle complaints or complaints later.
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