What to choose when conducting cryptocurrency transactions: anonymity or security? Why do cryptocurrency users need verification and is it really that scary? Today we will try to briefly understand this issue, and also describe some of the nuances and aspects that visitors to crypto sites have obviously encountered and will continue to encounter.
What are these scary words KYC & AML and what are they associated with?
Firstly, this abbreviation comes from the phrases “Know Your Customer” and “Anti-Money Laundering” that are already established in foreign law.
Secondly, their abbreviated use is generally accepted and is found wherever there are legislative restrictions (or requirements) related to state control over business entities. That is, where there are legal relationships, a kind of “client-company-state” chain.
Most often, this can occur as part of the licensing requirements imposed by the licensor on such an enterprise when receiving, for example, a financial or gambling license, when not only electronic, but also fiat money is in circulation.
Following new trends in this area, a new coin called AML Bitcoin (Anti-Money laundering Bitcoin, AtenCoin update), developed taking into account KYC policies, has even appeared on the cryptocurrency market & AML and the requirements of the Patriot Act (USA), and also issued with the approval of the NAC Foundation, a member of the ABA - American Interbank Association.
The Dash developers picked up the baton and decided, in partnership with the blockchain platform Coinfirm (UK), to create a separate commercial solution designed for the financial sector, which will be as close as possible to the conditions of KYC & AML and will take into account the peculiarities of the national legislation of the maximum number of jurisdictions.
What does all this mean and why, it would seem, new, unusual functionality appears in decentralized currencies? The answer suggests itself. This is, first of all, the increased demand for instant in-out cryptocurrency in conjunction with fiat money. We are talking about both cash and non-cash forms, including using the most popular payment instruments such as Visa and MasterCard, SWIFT payments, etc...
If previously, the majority of users endured inconvenience for the sake of anonymity, turning as a last resort to exchange offices to withdraw cryptocurrency into real money, then in the current realities, when the speed of transactions and the efficiency of cash-out are put at the forefront, a huge number of users, through their activity, confirmed the need to introduce financial innovations, albeit to the detriment of anonymity, but in favor of their own security.
No matter how trivial it may be, if you verify your identity and go through all the KYC & AML procedures, an attacker will no longer be able to steal your hard-earned “coins” so easily, running into at least limits when conducting transactions for large amounts, and at a maximum, requirements for additional re-verification. Moreover, a separate line should be noted that some online wallets, after verification of their clients (sometimes mandatory, and sometimes as a separate security measure), establish the so-called 2F authorization.
Which to prefer: anonymity or security is everyone’s personal choice. In any case, when choosing online wallets and exchange services. But as for crypto exchanges, more and more often, unfortunately, we are left with no choice, driving KYC & AML into the Procrustean bed. These are the realities and the new rules of the game in the jurisdictions of the European Union and the United States, which are increasingly tightening the requirements for their citizens and legal entities.
We plan to devote another article to the issue of verification and additional security measures.
You May Also Like
Bitcoin Wallets, Part 2: Local Software Wallets
Previously, we looked at the main ways to store cryptocurrencies and manage your funds. Now we continue our series and will dwell in more detail on programs that perform the functions of a wallet.
Opinion: 5 types of cryptocurrencies and their differences
All existing digital currencies can be divided into five types. The differences between these types are very important for investors, as they determine what exactly they invest in and who can invest in them.
