Previously cited in the article LexisNexis & Blockbid Partnership, KYC and AML formalities are in the line of sight of international regulators. However, it appears that only 32% of cryptos exchanges meet the guidelines. This is a study of the company P.A.I.D in partnership with Mitek, a technology provider for identity verification, which advances this low ratio.
The obligatory KYC procedure
The main purpose of the KYC standards is to fight money laundering and terrorist financing. Cryptocurrencies are known to be means of payment bypassing certain legal formalities; but companies active in this area such as Bitcoin portfolios or foreign exchange platforms are required to follow the rules to be able to continue operating.
Last December, the European Parliament’s Economic and Monetary Committee ordered crypto companies to identify their customers within 18 months of opening their accounts. The same goes for our neighbors across the Atlantic, although there is some confusion around this subject. A few months earlier in the United States, Coinbase had been forced to provide a list of customers who generated significant profits via cryptocurrencies for them to be taxed by the tax authorities.
The failure of 68% of European and American actors
The study, which lists a total of 25 US and European companies, showed that 17 of them do not apply compliance standards; indeed, only a banal email address and a mobile phone number are needed.
“Cryptocurrency portfolios and exchanges would like to enjoy the same trust as traditional financial services; but before that happens they must get rid of their dubious and opaque reputations and rise to the status of a model economic citizen. “John Devlin, P.A.ID Strategies analyst.
The coming of the 5th directive
It should be remembered that the recent entry into force of the 5th Anti-Money Laundering Directive could upset this sector, which is currently in full development. This directive continues in line with the 4th but emphasizes, among other things, the fact that all member countries must have a centralized register of national bank accounts and a system for recovering these data.
One of the major points of this 5th directive is that the digital exchange platforms, but also Bitcoin wallet holders, are required to provide the appropriate documents to pass the rigorous control put in place. Approved in April 2018, it will only be applicable in 2019. Let’s hope for these companies that by then, this meager ratio will be revised upwards.