The development of humanity has brought with it a continuous evolution in all aspects – from our way of life to how we are connected and produce things. Technological breakthroughs have been key for the evolution and survival of the species.
Payment methods have also evolved considerably: from the invention of barter in the Neolithic period to the usage of precious minerals; the salt used to pay soldiers in Ancient Rome or coins minted by the Greeks; from the banknotes created by the Chinese to the appearance of cryptocurrencies today.
Thanks to the emergence of the Internet, we have been able to digitize all aspects of our lives. Therefore it was a matter of time that money would also undergo this digital evolution, allowing us to improve our quality of life and increase our life expectancy.
Nowadays, we’ve all heard of cryptocurrencies. Bitcoin opened Pandora’s box and then came Litecoin, Ripple, DogeCoin or Ethereum, among many others, but… do we really know what they are and how they work?
What are Cryptocurrencies?
Cryptocurrencies are digital currencies that use cryptography to secure currency exchange transactions. Cryptocurrencies use a blockchain to be decentralized, thus providing security.
Their mission is to provide a different payment structure to the traditional banking system. The main goal is to unify the global banking system under a single virtual currency that is beyond state regulations providing unique features and advantages of these currencies, such as the reduction of transaction costs, by eliminating intermediaries, and immediacy in transactions.
By means of virtual currencies it is possible to carry out transactions on the Internet almost immediately between pairs (peer to peer “P2P”), where the transaction costs do not exist or are insignificant due to not needing an intermediary in the process.
Features of Cryptocurrencies
The most remarkable features are:
- Its system based on a network of decentralized computers, distributed all over the world.
- Their security and network depend on encryption using cryptographic algorithms, which maintain the anonymity of both the transaction and the users.
- Not being part of the monetary policy imposed by the central banks which carry out the change of value of the currency according to their policies.
The use of this technology has gradually increased in recent years. This has resulted in the creation of Exchanges aimed at exchanging fiat currencies (such as Euro (€) or Dollar ($)) to cryptocurrencies and vice versa. These exchanges value cryptocurrencies at a fiat currency value and complete the transaction by charging a commission.
Identity verification in the crypto market: KYC / AML
KYC “Know Your Customer” and AML “Anti Money Laundering” are regulations that establish the need for companies to carry out actions that allow them to know their customers identity (KYC) and prevent money laundering from illegal activities (AML) . Although initially these regulations mainly affected financial institutions, there are already many sectors that must comply with these regulations, such as online gaming or cryptocurrencies. The problem for these exchanges comes from the requirement to establish a security system that complies with KYC and AML regulations, since buyers and sellers, as well as the transaction itself, are anonymous due to the nature of the cryptocurrencies.
«Most of these Exchanges have manual, slow and rudimentary identity verification procedures within a digital onboarding process: users are asked for a picture of the ID card or passport, a picture of the individual holding their identity card with one hand and at the same time holding with the other a piece of paper on which is written the date of the day, their name and even their intention to buy foreign currency on that platform.»
«Most of these Exchanges have manual, slow and rudimentary identity verification procedures within a digital onboarding process: users are asked for a picture of the ID card or passport, a picture of the individual holding their identity card with one hand and at the same time holding with the other a piece of paper on which is written the date of the day, their name and even their intention to buy foreign currency on that platform.»
In addition, users also have to fill in endless forms with their own data and all the information collected (data, documents and photos) has to be manually analysed by an agent, resulting in users having to wait more than twenty-four hours (in some cases up to a week) to buy or sell these coins.
This means that many users do not succeed in completing their sign-up process. Therefore, these exchanges lose clients since they don’t necessarily want to wait so much time, and will look for a competitor with a straightforward digital onboarding system instead.
Solving KYC & AML challenges for cryptocurrencies
There is a possibility to use identity verification technologies for the crypto world to avoid losing more customers by making your platform more seamless and efficient thanks to an automatic registration process:
- MobbScan, our digital onboarding KYC tool, user registration times are reduced, resulting in a decrease in the drop-out rates.
MobbID, our biometric recognition solution in digital environments, you can authenticate user automatically, allowing your customers to interact with your platform from the first minute.
In addition, by integrating our cutting-edge technology, you will improve your technological image versus your competitors, as well as offering users a more enriching experience that allows your exchange to increase its performance.
If you are interested in our technology do not hesitate to contact us, and if you liked the article, share it!
I’m a Software Engineer with a passion for Marketing, Communication, and helping companies expand internationally—areas I’m currently focused on as CMO at Mobbeel. I’m a mix of many things, some good, some not so much… perfectly imperfect.
GUIDE
Fully know your customers and drive the growth of your business
The journey between an organisation and its clients begins with proper verification, ensuring the safety of both parties. This KYC guide is essential for understanding the importance of knowing your users and complying with legal requirements.
