Is KYC and AML Compliance Regulation a Must-Have, Must-Do Necessary ‘Evil’ in the Crypto Ecosystem?
The world of cryptocurrency has been torn between those that want regulation on the technology and those that deem regulation a violation of their privacy.
The latter group further terms the act of regulating the cryptocurrencies as a backward move from the benefits they offer including privacy and anonymity. News.Bitcoins latest look gives insight into why KYC/AML is important for crypto adoption.
Cryptocurrency exchanges, in particular, have been a target to the regulators that require know your customer (KYC) and anti-money laundering (AML) regulation to be implemented by the exchanges. While some of these exchanges comply with the call, others do not appreciate collecting any of their customer information.
These exchanges term this a violation of customer’s right to privacy and anonymity.
KYC And AML Compliance In Cryptocurrencies
The Regulators across the world are taking up the challenge to ensure these exchanges follow the KYC and AML compliance. Well, some cryptocurrencies, let alone exchanges, such as Electroneum (ETN) are now KYC compliant. However, the exchanges are fighting hard to keep their platforms compliance free so as to allow over 1.7 billion unbanked persons around the world to access financing.
Ethfinex Trustless decentralized exchange (DEx) launched their exchange without integrating KYC compliance in September 2018.
During the launch of the exchange, the Director of Operations, Will Harborne said Ethfinex was moving from the centralized systems to offer their customers with control to their security, privacy, and liquidity. He further spoke on the issue of KYC and AML compliance explaining that the source of a person’s funds will be open as the transactions are recorded on a blockchain.
Other exchanges include Hodl Hodl and Binance, the largest crypto exchange in trading volume, who allow trading without KYC compliance. However, Binance has strict AML systems to keep the exchange free from scams and illegal money.
Is Regulation Necessary In The Crypto Field?
Cryptocurrency industry is heavily accused of aiding crime around the world and money laundering by regulation proponents. The industry, however, faces these illegal activities less than traditional financial systems which raise the question if regulation is necessary for the field.
Most of the crypto exchanges have complained of the increased costs required for the implementation of KYC compliance laws. Kraken issued a complaint on the increase in costs of handling subpoenas which locks out various investors from the field.
While KYC and AML regulations are important in the field, the development of these laws should be done together with players in the crypto industry. These will ensure efficient laws are put in place while discouraging harmful laws to the growth and innovation of the field.