KYC/AML Compliance Policies Has Potentially Positive Impact on Cryptocurrency
One of the major requirements of any cryptocurrency that functions within the United States is the need to comply with Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) policies. There are many people that find these complex compliance protocols to be cumbersome, at best. Every user of a digital wallet is required to submit personal data to even set one up in the first place, which some investors claim to be a violation of the privacy that the industry thrives on.
Some would argue that these measures to protect companies are actually detrimental to organizations trying to run in the industry. Yago, a critic of the policies, has said that using KYC/AML procedures is comparable to global surveillance. He even goes as far as to predict that the compliance with these regulations could even allow for a “Big Brother” type of surveillance among users.
Is it Necessary to Get Rid of Regulatory Measures like KYC/AML to “Take Back” the Industry?
Not at all, because the whole crypto community has seen the potential for damage and theft in a world without regulatory measures. In fact, blockchain technology was basically synonymous of criminal activity, because of the lack of regulations that would otherwise protect users. Every single platform, investor, and founder took a major risk before these regulations, simply hoping that they would not lose big. The ecosystem will fail to thrive, and the market would come crashing down, losing billions of dollars for those with a significant stake in it.
Even though it is obvious that there are ways that the KYC/AML regulations involve releasing private information, it does not mean that it will hinder the user’s privacy. There are ways for KYC requirements to be modified to keep within the goals of cryptocurrency to remain private, withholding unnecessary details from a third-party with the potential to abuse it. Preventing money laundering will leave the industry more of a safe place and could make it more appealing to consumers that would otherwise be anxious about the lack of security. There is a compromise to be had here, and it is important that the crypto community get involved to find the middle ground.
If the goal of the industry is truly to adopt it into mainstream use, both blockchain technology companies and crypto platforms need to take a seat with the regulators in charge for a new solution. There has to be better technology that meets the needs of a wider audients. The KYC/AML policies provide opportunities to get involved with multi-stakeholder use cases, but without having to get involved with bad actors in the industry.
Right now, the whole structure of these policies is about the same as every other centralized financial enterprise in the world. Cryptocurrency and traditional currencies have to have some personal identifying information that would help them establish accounts, perform lending transactions, and transfer funds. The main difference is that cryptocurrency is decentralized, while fiat currency is not, which means that there are more openings for crime.
By using KYC/AML protocols, the cryptocurrency industry can improve the safety on the ledger and in their interactions, while keeping the flexibility that they were meant for. If something threatens that security, the ledger and the protocols help to find the cybercriminal quickly, and there is a defined consequence for the threat.
After considering the cost to companies that implement these regulations as required, it will give the businesses a greater foundation for new investors and spenders. Some jurisdictions have even seen the way that the United States has implemented the regulations and are adapting them for their economy, like Bermuda, Mauritius, and Australia. In fact, this has caused them to turn to the crypto and blockchain sector to see the best ways to integrate the regulations.
With cooperation from other economies, the concept of traditional identification is easier to get around, since the industry could work on other methods of verification. This transition would enable people to pay off loans and give the change to prove their credibility without the excessive release of data. Plus, once false businesses are filtered out with these costs, the industry will be more welcoming to innovators that aim to provide new opportunities that can push it forward.
When it comes down to the bottom line, using KYC/AML guidelines, and adapting them around the world, will pioneer the crypto community into the next big stage of development.