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KYC for Beginner Investors: If You Have Read About the Verification but Haven't Understood Its Meaning

We have analysed the laws, the opinions of the developers, ICO participants and regulators in order to tell you the most important details of KYC in one article.

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Cryptoassetsrank.com Published on Jul 13, 2018
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We have analysed the laws, the opinions of the developers, ICO participants and regulators in order to tell you the most important details of KYC in one article.

What is KYC?

KYC or Know Your Customer is an identity verification procedure that is carried out to identify a client. If you have ever taken a loan or opened a bank deposit, you have undergone KYC, when the employees scan your passport or make a photo of you together with the document.

The verification is carried out in compliance with the Anti-Money Laundering policy. According to the AML rules, they check the clients' personal information by PEP and other lists of potentially dangerous users, analyse the data about the citizenship and visits to countries with high risks of terrorist threat and look for the signs of potential anti-money laundering or theft of personal information.

Is KYC always required for ICO?

Not all initial coin offering organizers verify the personal information of their users. In some projects they only suggest filling in a whitelist. The team carries out an identity verification for two reasons:

  • It is required by the regulator. For example, in the USA the SEC placed the developers under an obligation to comply with the Know Your Customer policy.
  • It is their own initiative. Some developers anticipate that an obligatory verification can soon be introduced in their country and want to be sure of the honesty of their investors.

So far, only the U.S. regulator SEC placed the ICO organizers under an obligation to know their customers. The Korean regulator FSC placed the cryptocurrency exchanges under a similar obligation. The experienced investors and experts in Medium, Bitcointalk and other communities assume that in the coming years the KYC practice will expand and in the long run will become obligatory in all countries.

KYC process

If a project has its own verification department, they check the clients by themselves; if not, they invite outside experts or carry out an ICO through the platforms like Bitcoinsuisse.ch and Cryptonomos.

There are no unified requirements for the information to be requested about a client but most often you will be required to indicate:

  • full name;
  • country, city and postal code;
  • place of residence or registration address;
  • nationality.

To confirm the information, the clients are asked to send:

  • a scanned copy or a photo of the passport or ID card, less frequently - the driving license;
  • a photo with the document, where the client's face is seen clearly.
  • confirmation of the address, for example, paid utility bills.

The information requested at Bitcoinsuisse.ch

The verification process may take from 1 to 7 days. After the verification, the user gets a confirmation to his or her email address and can buy tokens.

Who needs the verification before the token sale and what for?

Regulators - in order to prevent money laundering, terrorism funding and theft of personal data.

ICO organizers - in order to make sure that among the investors there are no anonymous fraud artists, criminals and fake personalities who will take away their investments quickly and make a negative influence on the token exchange rate.

Investors - in order to make sure that the developers comply with the requirements of the regulators and the project will not be closed down because of the violation of law.

KYC actual problems

  • There are no government regulations and laws with unified standards for carrying out the verification procedure.
  • It is expensive to verify data: the organizers should either have in-house verification specialists or pay for the outsource services of such companies as TMF Group or Verum Crypto.
  • The verification procedure may take from 1 to 7 days.
  • For each startup you need to undergo verification again and you might need to submit different documents.
  • Sometimes the databases with the clients' data get hacked.

In Datawallet they do not indicate the exact date of the end of verification.

Those problems have been partially solved by such platforms as Bitcoinsuisse.ch. They ask for the documents only once and give a chance to participate in all ICOs that are their partners without having to undergo repeated verifications.

The creators of the blockchain platform also try to make KYC easier, faster and cheaper. For example, in the startups ICO Pass and KYCLegal they created unified registries of verified data using crypto based technologies. The solution will help to make the verification procedure cheaper and quicker, will prevent the risk of data theft and the need to undergo repeated verifications.

 

Quick verification in ICO Pass

Now you know why they ask you to submit a copy of your passport. Time to practise: assess the pros and cons of the personal data verification and look through our ICO rating. If you would like to participate in legitimate ICOs and won't be afraid that a startup will be closed down, filter the projects by KYC. If you want to stay anonymous, use the "no data verification" filter.

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