Many banks and other financial institutions use KYC as a mandatory safety measure. If you look at the definition of what KYC or Know Your Customer policy, is, you might want to ask a question. Doesn’t it mitigate the ground principles of blockchain, particularly, anonymity, when it comes to cryptocurrencies? No, it actually does not. But let’s take a closer look at the whys of it.
KYC is something we are completely familiar with when it comes to centralized businesses and financial entities. They need this information to ensure protection against money laundering. When you set up a bank account, you are required to submit a lot of personal information about yourself, starting with your name, passport data, and proof of address. Depending on a particular business entity a KYC verification procedure can include information about your sources of income and biometric data. Further on, a financial organization may also store information about your customer behavior. For instance, alerting its security service if you receive a transaction that is much larger than what you have been usually dealing with. This information is considered private and is protected. But centralized organizations are much easier targets for hackers than decentralized.
But when it comes to blockchain and cryptocurrency, the very idea behind those concepts is that of anonymity. So why do many cryptocurrency-related organizations, such as HD wallets and crypto exchanges ask for a KYC verification? One of the biggest concerns governments and societies have about full-scale adoption of cryptocurrency is that it makes it technically possible to create cash flows that are untraceable and limitless. This opens wide venues for black markets, tax evasion, and money laundering. To comply with anti money laundering laws and other regulations, exchanges and wallets have to implement KYC procedures. A few exchanges, such as Binance, for example, only perform KYC checks when your daily trading volume exceeds a certain amount. The good news is, however, that with blockchain projects, your KYC data is kept on a decentralized ledger, so it is much harder to break into. It is as secure as the blockchain itself is.
OWNR Wallet requires a KYC check that is fairly simple and quick. We do not collect biometric data or information about customer behaviours, but we do require proof of ID, proof of address and proof of funds. This procedure can be carried out online and we accept good quality scans or photographs of the required documents. This data is required for security purposes only. We do not disclose it when you are making a transaction or perform other tasks using your wallet. More information about KYC verification in OWNR Wallet you can find here.