KYC stands for 'Know Your Customer' and is the process companies use identify their customers. The intention is to prevent illegal financial activity.
KYC, or “Know Your Customer”, is one of the most misunderstood concepts in cryptocurrency. Crypto users occasionally come across KYC when using a foreign exchange, or when investing in certain ICOs. Otherwise, the term doesn’t come up very often. Nonetheless, KYC is an important concept to understand if you wish to be a regular ICO investor.
“Know Your Customer” is a blanket term for different ways companies identify their customers before conducting business with them. KYC is meant to prevent money laundering, bank fraud, and other illegal financial activity. KYC is required by various governments to various degrees, but certain companies voluntarily create their own KYC regulations.
This is because banks, insurers, and financial companies don’t want their platforms being used for nefarious activities, and not simply because the government makes laws against these practices. Fraudulent activity can threaten the performance and operation of a platform or company, so clearly identifying users may be in the best interest of the company in question.
Not all ICOs use KYC, but some do. For the most part, these ICO companies use KYC because they are obliged to do so by government regulation. Cryptocurrency is still a young industry, and the frantic activity surrounding ICO funding has brought certain unsavory characters into the space. Fraud is common in blockchain fundraising, so some national governments have strict KYC standards to prevent this.
KYC may be as simple as uploading a picture of your government issued ID. In other cases, you may be required to give proof of address, employment, citizenship, etc. Your name may be screened against criminal databases. You may even find that you’re rejected from participating in the ICO because of info from your KYC. Rejections tend to occur when an ICO only accepts investors from a specific country and the investor lives somewhere else.
Fortunately, not all ICOs have strict KYC standards, and not all ICOs that use KYC are terribly picky. If you are eligible to participate in an ICO, don’t fear KYC. You’ll likely be accepted. Just answer honestly and send in the requested information. For ICOs to pass our verification process, they must have a strict KYC procedure, it helps protect the ICO in the future and hence the investor.
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