There are different ways to buy and sell Bitcoin, and using a digital currency exchange is one of the easiest. By registering in the exchange, you can convert fiat currency (common currency of countries) into digital currencies and make all kinds of exchanges between them. As the governments passed various laws in the crypto field, exchanges were required to perform KYC or identity authentication.
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Most exchanges require the user to complete the authentication process immediately after registration, and there are exchanges that do not require this. In this article, we want to talk about the importance of this issue and the risk of buying digital currency without authentication and the issues surrounding this issue. Stay with us until the end.
The word KYC stands for Know Your Customer and it is called “authentication” in Farsi. The KYC law says that a financial institution must know the details of its users in order to prevent the activity of criminal and wanted persons and in other words to prevent money laundering.
When the user performs the authentication process, in fact, the wallets provided by the exchange are linked to the user’s identity and all his activities can be tracked. User turnover, average deposit and receipt of money in different time frames, connection with different types of blockchain wallets and such issues are things that can be investigated by the exchange if illegal or suspicious activity is observed.
Authentication procedures are similar in most digital currency exchanges. The user must provide his full name, residential address and phone number to the exchange. Next, the user is asked to provide the image of certain documents such as an ID card or passport, and finally, a selfie photo along with one of the specified documents must be sent to the exchange to confirm that the documents belong to the person in question.
Of course, there are some exchanges that ask the user for other information such as job, picture of electricity bill, phone, etc. for more assurance.