The COVID-19 pandemic has moved even the most resolutely analogue activities online. At the beginning of 2020, no one considered that elementary schools would go virtual or that offices around the globe would institute a fully remote workforce.
What a difference a year makes! COVID ground economies to a halt, drove thousands of businesses out of operation, and turned major cities into ghost towns. But the shutdown of the business-as-usual accelerated our digital lives.
Amazon posted record sales during the pandemic — everyone was making purchases from their screens and tablets. As we learned to conduct our professional and personal lives online, it’s no surprise that interest in digital-native cryptocurrencies soared.
As the entire world logged on, global digital currencies looked more and more appealing, especially if we take into consideration that governments are increasing the amount of money circulating, in order to boost their economies. Put simply, bitcoin has become a safe haven.
Although interest in cryptocurrency has grown in the pandemic, newcomers to digital assets may be frustrated by the tedious process of buying crypto.
Most people are used to the one-click purchase model of e-commerce, but buying bitcoin isn’t like ordering takeout or joining a Zoom call.
In most jurisdictions, the rules that pertain to digital assets are complicated and cryptocurrency exchanges face significant regulatory scrutiny.
Because digital currencies are financial instruments, anyone who deals with them must adhere to a whole series of Anti-Money Laundering (AML) and Know Your Customer (KYC) standards, which includes document verification as well – and a selfie next to their document does not meet these standards.
Further, the relative novelty and unfamiliarity of cryptocurrency — crypto’s history is measured in months and years, not decades and centuries — requires the industry and regulators to adapt and determine suitable requirements.
The three barriers to cryptocurrency adoption
Even the most traditional financial institution would have to devote significant resources to KYC and AML efforts, but cryptocurrency’s unique properties pose special problems for institutions and individuals alike.
First, there’s the fact that cryptocurrency purchase and trading is done almost entirely online. When you open a bank account at a traditional Main Street brick-and-mortar bank, you’re likely to do so in person, sitting opposite a bank official with documents in hand.
In 2020, this presents a logistical challenge, but even before COVID-19, no such option existed for digital currencies.
The second obstacle that faces crypto-asset providers is geographic diversity. Businesses may recognize potential customers and traders in almost every country in the world, but each country has its own rules, its own regulators, and its own designs for identity documents.
If a firm cannot verify documents and complete KYC/AML screening for customers from a particular country, it must turn them away.
And even if that firm later expands its capabilities, many would-be customers who were disappointed once are likely to have turned to a local exchange or have concluded that cryptocurrency just isn’t for them.
A third challenge for cryptocurrency exchanges is ease and speed of verification. Simply choosing passwords and security questions for non-financial websites is inconvenient enough; older identity verification tools may require scanning documents and uploading photos.
Completing the process is feasible but frustrating, and new sign-ups may have to wait for their verification to complete. At every step of a protracted verification process the risk of abandonment increases.
If the verification process is dependent on employees manually checking each user application, that can lead to delays of days before a new sign-up can use the product.
Customers’ first experiences with a service provider color any future interactions; a lengthy and inefficient sign-up is unlikely to inspire enthusiasm.
Identity verification technology paves the way forward
Thankfully, it’s possible for businesses to balance convenience and thoroughness in identity verification and account creation. For example, “biometric identification” sounds ominous, but it means that users can use selfies to confirm their identity.
Some banks even believe that those face-to-face account setups, which COVID makes difficult, should be a thing of the past.
Thanks to new tools, cryptocurrency exchanges such as Bitbuy and Metal Pay can verify identity documents from dozens of countries around the world to help them meet compliance requirements in just a few clicks. Compliance and convenience are no longer opposed.
The burden of regulatory compliance should always fall on the institution, not the customer. Cryptocurrency providers have a legal and ethical responsibility to keep untrustworthy people out of their services, but good business sense mandates that they make identity establishment as quick and painless as possible for new customers.
With global identity verification, the business-client relationship starts off on the right foot, regulators are satisfied, and the world of digital assets grows one person larger.