One-third Of Crypto Platforms Lack KYC, Ciphertrace Drops Shocking Revelation


A massive chunk of the cryptocurrency niche is apparently functioning against the law. Many cryptocurrency platforms are operating against the guidelines put in place by the Financial Action Task Force (FATF). These are specifically the Travel Rule policies made public in July and this discovery was made from recently conducted research.

Shocking Revelation

The really shocking revelation was made by CipherTrace, which is known for its outstanding blockchain compliance solution services. It announced during its third quarter digital currency anti-money laundering report that up to one-third of all the prominent 120 crypto exchanges have next to nothing when it comes to the vital know-your-customer (KYC) verification process. It categorized all of them as weak as far as implementation of the KYC policy is concerned. But that was not all, even a more shocking two-third of all these exchanges do not have a reliable KYC framework in place.

The FATF guidance is widely adopted by the 39 member countries and regions that have agreed on its formation. In addition to the regulation it provides, it also gives information for the exchanges or the virtual asset providers (better known as VASPs) on several aspects of their operations. These include what they can obtain, keep and share in relation to data of their clients.

All these are even more important when the transactions in question are valued at $1,000 or more. By adhering to the regulatory framework, there will be valuable digital footprints for each transaction. These footprints become very important when it comes to the prevention or investigation of financial crimes like the financing of terrorism or money laundering.

According to CipherTrace, time is running out. The firm says that just seven months is all that is left now for the member nations to adapt their laws with the guidance. Also, the same applies to the VASPs who need to also set up their frameworks in line with full compliance. But it also pointed out that around 65% of the exchanges are not even in a position to cope with the rudimentary KYC requirements. If that is the case at hand, then they cannot even be expected to fully cope with the know-your-customer guidelines, specifically the Travel Rule which is considered to be even stricter than conventional frameworks.

Present Condition

Those who carried out the research discovered that they were able to carry out 0.25 bitcoin daily transactions with virtually no KYC at all. And this alarming rate was detected in 35% of all the exchanges tested. Hence, they did not waste any time to call their KYC structures weak.

A total of 41% were said to be unreliable even though they had some semblance of identification verification while only 35% had what can be regarded as strong KYC. The latter had some things in places such as several levels of verification which included proof of address details or even phone and video calls that ensured proper confirmation. If this remains as it is, it is definitely going to affect the integrity of the entire crypto niche with time.

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