A recurring question from the community is why we and many other high profile ICO’s are now requiring users to go through an account verification process often referred to as KYC — Know Your Customer. We thought that we should shed some light on how this recent development came about and why it is important for initial coin and token offerings.
What is Know Your Customer (KYC)?
In simple terms, the process provides an identity verification. By using an identity document (e.g. national ID card or passport) and a proof of address (e.g. bank statement or utility bill), you are proving beyond a reasonable doubt that you are who you state to be.
The aim of KYC is to prevent theft, fraud, terrorist financing and money laundering. It helps us ensure that our clients are not involved in any of the above, hence the service provider won’t get in trouble with the regulators.
What is Anti-Money Laundering (AML)?
In a nutshell, anti-money laundering (AML) refers to the laws, regulations and procedures that were put in place to render income through illegal actions and sources unfeasible. Every institution that deals with money or stores of values are obliged to comply with these laws.
As an entity that aims to be compliant with Swiss laws we are obliged to detect, prevent and report money laundering activities. In highly regulated environments, such as financial record keeping, these procedures help to limit and stop the cash flow for terrorists, organized criminals and drug smugglers that rely on money laundering to maintain their illegal activities.
Why is it important for ICOs?
It is getting increasingly harder for coins and tokens to get listed on exchanges. High profile companies such as Bittrex, Kraken, Coinbase/GDAX and others now look to protect their business model by limiting the new trading pairs to projects that are fully compliant.
By providing a solid legal framework, particularly with regards to being considered a security in the United States, new assets issue an assurance to these exchanges, backed by regulation, which in return makes it easier for coins/tokens to be listed in the first place.
In essence, KYC/AML are mandatory in today’s financial world, as they help to prevent terrorist funding and cash flow from criminal activities. The process is simple for the end-user (usually a matter of minutes) and makes the world a better, safer place.
