What is identity verification or KYC process?
Investing in cryptocurrencies is becoming more and more popular every year. But for cryptocurrency exchanges to grow, they need to have the permission from the governments to work in each and every country.
And for that they need to know who their customers actually are and that's where the identity verification comes into play.
KYC is and acronym and means "Know Your Customer". It's the term for the process used to verify customer's identity.
What information does an exchange ask from you?
During the KYC process you can expect to share the following information:
- Full name
- Birth date
- ID document (passport, ID, driver's license)
- Proof of address
- Selfie of your with your passport
Note that the list of document may vary depending on the exchange as well as your country of residence.
How do you share your documents with the exchange?
In most cases there are two options to share your documents:
- Upload photos (.jpg, .pdf) of your ID card, proof of address, and a selfie using an online form
- Use your webcam to take photos of them on the verification page directly
These days NO self-respecting exchange would ask you to send them your documents over email.
Is it safe to share your documents?
None of us wants to share our data, especially if that data contains our passport, our address and whatever else. So when we do share them, we need to make sure we share them with only reputable companies.
So always make sure to choose only safe cryptocurrency exchanges.
How can I make things even safer?
It is recommended that you don't share information you're not asked for. It could be the signature on your ID card or anything else.
If it hasn't been asked for, hide it.
It's also a good idea to add a watermark to all images you send the exchange, saying something like "For [EXCHANGE] KYC ONLY". As long as the watermark doesn't hide any important data, it's all good and can be done using any image manipulation software.
Note that after you add the watermark, it might make sense to take a photo of the watermarked image instead of just saving it and sending them that one.
The reason for that is simple - images can include a set of metadata that can make it possible to see what it looked before the image was edited. While it's possible to remove that data from the image as well, it's easier just to take a photo of the edited image.
While the exchanges do keep your data safe, it pays to be prepared for anything.
But then again, how far you are willing to go to keep your data safe, that depends on you.
How long does KYC process take?
In case of most bigger cryptocurrency exchanges the KYC process has been automated and there's no human interaction required from the side of the exchange.
And this means the KYC process won't take more than a few minutes.
However, sometimes it might take an hour or two to get your documents approved and seldom up to couple of days.
Why is KYC process necessary?
For you, as a customer, you usually need to verify your identity in order to get access to all features, remove limits and make sure you won't have problem withdrawing from the exchange.
It can also help regain access to your account should you lose your phone number or email address or access to 2FA authenticator.
From the exchange's perspective, on the other hand, they require the information to make sure they comply with anti money laundering laws.
The negative aspect of identify verification
Bitcoin started as a totally anonymous form of payment and decentralization is actually one of the best features of blockchain technology.
Decentralization means that there's no one man, government, or company, that has control over the system.
KYC requirement take much of that away, and bring cryptocurrency exchanges closer to how traditional financial institutions function.
Users also lose anonymity with the KYC process and your data is "out there" waiting to be hacked.
So yes, KYC is not necessarily a good thing.
Conclusion
KYC requirement is becoming more of a rule rather than an exception. While it does give the cryptocurrency exchanges more legitimacy in the eyes of the governments and make it safer for the users, it also removes the idea of decentralization and anonymity the whole crypto sphere was built on.
