In a recent interview, Lennix Lai, the global KYC chief commercial officer inerview of crypto exchange OKX, said that KYC (Know Your Customer) checks are necessary to “raise the bar” in the crypto space and bring in more traditional investors.
Lai’s comments come at a time when KYC is becoming increasingly common among crypto exchanges. In recent months, several major exchanges, including Binance, Kraken, and Coinbase, have implemented mandatory KYC checks for all users.
While some members of the crypto community have criticized KYC checks as an invasion of privacy, Lai believes that they are essential for the long-term growth of the industry.
“If ever your compliance standard cannot meet or somehow talking in the same language with traditional finance, they can never, despite of their interest, despite of our innovation, invest or bring in capital to the space,” Lai said.
What is KYC in Blockchain Economy?
KYC is a process of verifying the identity of a customer. It is typically used by financial institutions to prevent money laundering and other financial crimes.
In the context of crypto exchanges, KYC checks typically involve collecting the following information from users:
- Full name
- Date of birth
- Phone number
- Government-issued ID (e.g., passport, driver’s license)
Once users have provided this information, the exchange will verify it against a government database. If the verification is successful, the user will be able to use the exchange’s services.
Benefits of KYC in Blockchain Economy
There are several benefits to implementing KYC checks in the crypto space.
First, KYC helps to prevent fraud and other financial crimes. When users are required to verify their identity, it is more difficult for criminals to use crypto exchanges to launder money or finance other illegal activities.
Second, KYC helps to build trust between crypto exchanges and their users. When users know that their exchange is conducting KYC checks, they feel more confident that their funds are safe and that the exchange is legitimate.
Third, KYC helps to attract institutional investors. Many institutional investors are reluctant to invest in crypto because of the lack of regulation. However, if crypto exchanges implement KYC checks, it will make the industry more appealing to institutional investors.
Challenges of KYC
Despite the benefits, there are also some challenges to implementing KYC interview checks in the crypto space.
One challenge is that KYC can be expensive and time-consuming for exchanges to implement. Exchanges need to invest in resources to collect and verify user data.
Another challenge is that KYC can be difficult to implement for users in some countries. For example, users in countries with authoritarian governments may be reluctant to provide their personal information to crypto exchanges.
The future of KYC in crypto
Despite the challenges, KYC is likely to become increasingly common in the crypto space. As the industry matures, regulators are likely to require exchanges to implement KYC checks. Additionally, exchanges will want to implement KYC checks in order to attract institutional investors and build trust with their users.
KYC checks are a controversial topic in the crypto community. However, there are several benefits to implementing KYC checks, including preventing fraud, building trust, and attracting institutional investors.
As the crypto industry matures, KYC is likely to become increasingly common. Exchanges that implement KYC checks will be in a better position to succeed in the long term.
Beyond the basics
In addition to the basic benefits and challenges of KYC, there are a few other things to consider.
One important consideration is the impact of KYC on privacy. KYC checks require users to provide personal information to exchanges. This information can be used for surveillance or other purposes that users may not be aware of.
Another consideration is the impact of KYC on financial inclusion. KYC checks can make it difficult for people in developing countries or marginalized groups to access cryptocurrency interviews.
It is important to weigh the benefits and drawbacks of KYC carefully before implementing it. Exchanges should also be transparent with their users about how they will collect and use KYC data.