How KYC for ICOs can Make Cryptocurrency Great Again ?
Give people a mode of money transaction free from banks. That was the thought behind cryptocurrency. And blockchain technology – that powers the majority of cryptocurrencies – was the perfect tool to achieve that.
But things have not gone as planned. Mention Bitcoin in a gathering and you will surely hear voices of fake KYC Of ICOs and Ponzi schemes.
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What went wrong with Cryptocurrency?
The deregulated nature of Bitcoin worked well in attracting money. But it created another problem. When something is not regulated people exploit it. Scammers and double-dealers started jumping on the bandwagon of ICOs with the intention of fooling people into giving their fiat currency.
On the flip side, those that were looking to park their illegal money hit the jackpot. ICOs that genuinely wanted to create value in the world through their coins got the short end of the stick.
The financial regulation bodies started cracking down on ICOs and exchanges. ICO’s could not take investors onboard without taking the risk.
According to a statement by the securities and exchange commission;
“A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation”
So, what’s the solution?
A tried and tested solution is Know Your Customer or KYC compliance.
What is KYC ?
KYC stands for know your customer, it is a process that lets companies know their customers. It includes the verification process that prevents fraudulent individuals from abusing their services. Banks have been successfully using KYC services for years.
Different financial regulatory authorities have made it mandatory for banks to comply with KYC verification to make sure that the person they are dealing with is not a fraud.
Banks check and verify personal information through several means including document verification. They also readily appropriate credible third-party identity verification services or KYC service providers.
Documents such as government-issued ID cards and driver’s licenses help smoothe the process of investing.
What is AML?
AML – the anti-money laundering act – prevents people from laundering money. ICOs can put this in place as well to ensure that the people buying their tokens are not on any black or greylist.
KYC and AML regulations put a barrier to entry by checking the identity documents. FINRA Rule 3310 governs the AML compliance of companies.
Advantages of Implementing KYC for ICOs
- Deters scammers from engaging in ICOs
- Fights money laundering
- Protects investors’ assets
- Fewer legal, tax and credibility issues
- A healthy relationship with banks
Funds raised by ICO or token sales can attract black money. But KYC and AML compliance can restore people’s faith in the blockchain based economy. Cryptocurrency exchanges can also put these compliance measures to ensure that the ICOs are genuine. Then the token economy will truly benefit the population at large.