While retail and institutional brokers have long been complying with AML regulations and collecting data from their clients, in the crypto-world, anonymity has been a valuable asset. Exchanges have been accepting clients without applying strict requirements to verify them.
The matter came into focus for the Malaysian central bank, Bank Negara Malaysia, which has officially unveiled a list of KYC (know-your-customer) requirements for crypto exchanges that are on-boarding clients from the country.
Full KYC Process
The forms require that customers provide documentation that confirms their identity in detail. The bank’s effort is part of the new anti-money laundering legislation which was passed into law by the Malaysian government earlier this year and came into effect on the 27th of February.
All exchanges that are offering to clients fiat-to-crypto, crypto-to-fiat and crypto-to-crypto services, need to get a list of documents from Malaysian residents. The bank is introducing the clarification to inform exchanges that they need to identify and verify the identity of their clients.
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The regulatory changes are affecting every exchange that is operating in Malaysia.
The KYC process on the part of crypto exchanges must include the full name of the client, his national ID card number, his residential address, date of birth, nationality and the purpose of the transaction that he is wants to execute on the exchange.
Needless to say, the cryptocurrency industry is having a hard time catching up with the many regulatory demands from different jurisdictions. Customer service requests are already overloading the support desks of crypto exchanges.
Since any additional KYC efforts require additional resources to verify clients, exchanges need to onboard new staff or find reliable partners that can handle the process for them.
Regulatory frameworks globally appear to be focusing mostly on the AML aspect of cryptocurrencies, therefore introducing more stringent requirements for institutions in the space that are handling transactions.