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$14 billion.
That's 14 with nine zeros after it. All disappeared from the accounts of crypto investors and into the hands of scammers.
In the decentralised world of cryptocurrency, it can sometimes feel that security is totally on the investor. But where to start? What’s the most effective way to stay secure across the network?
Changes in government legislation make KYC the optimal contender in the battle for higher security in cryptocurrency. Keep scrolling to learn how KYC works, and how it will help keep fraudsters at bay and away from your hard-earned crypto.
What is KYC? KYC is short for “know your customer”. It’s a way for financial institutions to vet individuals to determine if they are who they say they are. If you ever opened up a bank account, you would have gone through some form of KYC in your bank application. In crypto, these stages of identity checks are put into place to keep fraudulent traders from hiding their illicit activity behind legitimate money movements.
For Brokerages For more established brokerages, KYC is always completed when opening an account. From that point on, you can trade freely using quicker, less intrusive forms of security. Every 1-2 years, the brokerage performs a check-in on your identity and updates details that may have changed within this period.
For Centralised Exchanges Exchanges—decentralised ones in particular—have been under fire recently for failure to properly implement KYC procedures. While some exchanges perform KYC upon sign up, many others will hold off on identity verification. While this makes the sign-up process easy and attractive to potential customers it does have a downside.
When an investor tries to withdraw funds, they are stuck with an obligation to complete a lengthy KYC process. In the time it takes them to complete the application, the market conditions may be entirely different. The transaction could end up changing in value from the moment the original withdrawal took place.
For Decentralised Exchanges Decentralised exchanges (DEXs) for the most part avoid KYC altogether. They get away with this by moving operations to countries that don’t have any KYC legislation. While you might be enticed to trade on a DEX due to higher levels of anonymity and privacy, keep in mind that these exchanges attract significantly more criminal and fraudulent activity. Having your own security methods in place is paramount to staying safe in this part of the crypto world.
The Importance of KYC You have a wallet, a key, a backup key, a seed phrase, and solid-state storage.
Why the need for yet another layer of security? Why do we need KYC?
Outside of it being a legal requirement in the USA, Australia, and many other countries, KYC plays a key role in preventing illicit financial activity. While your passwords are there to protect your assets, KYC prevents exchanges from being infiltrated by scammers and other crypto criminals. This in turn ensures that you can continue to safely trade your crypto without fear of being compromised.
Methods There is a general process to KYC procedure, but keep in mind that the method to complete this process may vary between financial institutions. Some common methods are:
Although exchanges also have high levels of security, they are more prone to hacker infiltration. You may be required to complete the KYC process multiple times and at a higher frequency. You might be required to do KYC every time you withdraw funds.
Personalised crypto brokerages, like Caleb & Brown, offer the same—if not better—levels of security as an exchange. But they don’t sacrifice security for simplicity. KYC is completed upon signup, and two-factor authentication(2FA) is used for daily account access and trading. This ensures that transactions can be completed with minimal delays.
KYC vs. Anonymity in Crypto What about anonymity? Isn’t that what crypto is all about?
What makes crypto such a viable currency option is that, yes, it’s out of the hands of banks and other centralised institutions. But when you create a currency that operates under the guise of anonymity, criminals are bound to take advantage of the system.
Instead of having a few bad apples ruin the benefit of decentralised currency, KYC ensures that crypto stays around. Without these processes in place, many governments may eventually ban the use and trade of cryptocurrency altogether. Lack of KYC makes crypto easily accessible to criminals and makes trading crypto overall less safe. With the introduction of KYC, cryptocurrency may begin to be looked upon favourably by regulators, potentially reducing government interference in the space.
It’s a minuscule price to pay; to leave some of your private information in the hands of a very secure system. In exchange, you receive a complete security solution that protects you and the wider community from theft and illegal activity.
Keep Your Assets Safe at Caleb & Brown Security is an ongoing concern within the crypto community. Although there have been improvements in security across the industry, scams and breaches still do occur. Consider putting your trust into a financial institution that has your back and will work tirelessly to keep your assets safe.
Caleb & Brown has layers upon layers of security within their brokerage. But they’ve also found a balance between security and useability. KYC only needs to be performed upon sign-up, allowing you to trade any asset through a quick and safe 2FA process. They also provide real-time customer support that is driven by an actual team. Whether you call or email, you’ll get a human response within less than 24-48 hours. And did we mention that you have your own broker on call 24/7?
If you’d like to learn more about our security methods—or are ready to start investing—sign up for a free consultation today.
This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.
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