At the end of March the United Kingdom’s financial watchdog, the FCA, has announced that crypto-involved companies in the UK are now obligated to submit financial crimes-related information in the form of yearly reports.
Some may think that this kind of reporting could be considered a step back from the freedom that the crypto industry promised at the beginning of its inception. However, in actuality, this decision is likely to lead to many good things for the industry in the long term.
One of the major reasons why cryptocurrencies have been slow on the pickup by mainstream companies and companies outside of the crypto industry until now is the lack of trust and the fear of crypto funds being associated with criminals and scams. It is no secret that the crypto industry has been the victim of many hacks, thefts and other cybercrimes in the past.
All the more reason why this recent decision by the FCA is so important. Gaining a better understanding of how criminals operate and use crypto assets will ensure companies in this sector provide the best possible security for their clients. They will be able to keep the funds entrusted to them safe while at the same time fostering greater trust from the general public.
And, on the regulator’s side, this measure will help gain a clearer picture of the market and its vulnerabilities, opening avenues for the development of regulations meant to target these weaker spots specifically.
All of this is necessary for the progressive development of the crypto industry and its inclusion into the greater financial services ecosystem.
With the growing presence of major non-crypto players like Visa and PayPal, it does not come as a surprise that security is becoming a much more important matter now.
We have been observing a trend where more and more crypto companies are hastening the implementation of KYC/AML measures. At the same time, clients begin to show more patience for such matters and willingness to undergo proper KYC procedures. Our own internal data showed a 65% increase in willingness to pass verification processes, compared to how things were before the recent bull market.
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All of this shows that both crypto businesses and users are now showing a more serious attitude towards the matters of KYC.
The topic of KYC has always been somewhat controversial among the crypto community. While it has long since become the norm in traditional finance, people that come to crypto often argue against delaying factors like that. Not only does KYC slow down access to the services they want, but some clients also may be hesitant to relay their personal information.
Crypto exchanges then get caught in an unfortunate position, they are forced to choose between forgoing KYC measures for the sake of swift operations and fulfill their obligations of protecting their client’s money with all due responsibility.
What also needs mentioning is that adhering to proper regulatory compliance measures requires a company to invest a significant amount of time and effort. And, in the end, all platforms decide for themselves what levels of security they wish to maintain and how much it agrees with their business policies.
We chose to follow a regulated path in developing our business from the very beginning because we believed that the industry will eventually shift in this direction.
The implementation of proper KYC/AML measures could demonstrate that the platform takes its clients seriously and helps build trust with the community. If you are looking at the market from the long-term perspective, then efforts in this direction will certainly pay off.
And, it seems that the market has finally come to realize this if the recent improvement in regulatory climate is anything to go by. The crypto sector is much more reliable and mature than in the beginning, with more and more companies choosing to go down the path of regulation to achieve trustworthiness with their clients.
Konstantin Anissimov, Executive Director at CEX.IO.