At the end of March, the British financial watchdog – the FCA – announced Companies involved in crypto in the UK are now required to submit financial crime information in the form of annual reports.
Some may think that this type of reporting could be seen as a step back from the freedoms that the crypto industry promised when it was first founded. In reality, however, this decision should lead to many good things for the industry in the long run.
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One of the main reasons why mainstream companies and companies outside the crypto industry have been slow to adopt cryptocurrencies is the lack of trust and fear that crypto funds will be linked to criminals and fraud. It’s no secret that the crypto industry has been the victim of many hacks, thefts, and other cybercrimes in recent years.
This latest decision by the FCA is all the more important. A better understanding of how criminals work and use crypto assets will ensure that companies in this sector are providing the best possible security to their customers. They will be able to keep the funds entrusted to them safe while cultivating greater trust in the general public.
On the regulator’s side, this move will help to get a clearer picture of the market and its vulnerabilities, and will open up opportunities for the development of regulators specifically targeting these vulnerabilities.
All of this is necessary for the continued development of the crypto industry and its inclusion in the larger financial services ecosystem.
With the growing presence of large non-crypto players like Visa and PayPal, it is not surprising that security is now playing a much more important role.
We have observed a trend in which more and more crypto companies are accelerating the implementation of KYC / AML measures. At the same time, customers are showing more patience for such matters and a willingness to undergo appropriate KYC procedures. Our own internal data showed a 65% increase in willingness to pass verification processes compared to before the recent bull market.
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All of this shows that both crypto companies and users are now taking a more serious stance on the affairs of KYC.
The topic of KYC has always been a bit controversial in the crypto community. While it has long become the norm in traditional finance, people who come to crypto often speak out against such delay factors. Not only does KYC slow down access to the services they want, but some customers may be reluctant to share their personal information.
Crypto exchanges then find themselves in an unfortunate position – they are forced to choose between foregoing KYC measures in order to keep them running quickly, and taking due responsibility to meet their obligations to protect their customers’ money.
It is also worth noting that a company needs to invest a lot of time and effort in order to comply with proper regulatory compliance measures. Ultimately, all platforms decide for themselves which security levels they want to maintain and the extent to which they comply with their business guidelines.
We chose a regular path in developing our business right from the start because we were convinced that the industry will ultimately shift in this direction.
The implementation of suitable KYC / AML measures could show that the platform takes its customers seriously and helps to build trust in the community. If you look at the market over the long term, efforts in this direction will surely pay off.
And it seems the market has finally realized this when the recent improvement in the regulatory climate is to be expected. The crypto sector is much more reliable and mature than it was at the beginning, and more and more companies are turning to regulation to gain the trustworthiness of their customers.
Konstantin Anissimov, managing director at CEX.IO.