After a hair-raising 2017 with scores of ICOs raising millions of bucks overnight, the morning after is hitting hard. In the cold light of day, many a prospect that seemed so attractive suddenly looks rather plain–or worse–they’ve run off with your money. Investing in ICOs isn’t for the faint-hearted. We all know there are a few crypto investors out there on their yachts, but there are plenty more licking their wounds at home. So how can KYC help?
While the crypto landscape still remains for the most part, lawless, and regulation scarce, there are some ways that respectable ICOs can help rebuild investor confidence. One of them is by carrying out KYC (Know Your Customer) processes on their investors. In fact, KYC, rather than just a good idea, is becoming a prerequisite of doing business. Let’s check it out.
What is KYC?
Know your customer (KYC) is where a business verifies the identity of their clients. This may be by requesting proof of address, or government ID documents. Many ICO investors are now being asked to upload a photograph of themselves holding their document, so as to prove that it hasn’t been stolen and isn’t fake.
KYC is often also referred to when anti-money laundering (AML) regulations are enforced. Many different entities carry out KYC practices not only on their customers, but their employees and other stakeholders as well.
Why Does it Matter?
After all the high profile scandals, hacking attempts and scam teams, legitimate ICOs who want to repair their images should start to get serious about self regulation. It is a simple, yet meaningful way of demonstrating your company’s legitimacy. And here are five other reasons why KYC is so important, besides:
1. If you’re operating in the US in particular, KYC had better be high on your radar. Why? Because the SEC will be hot on your heels if it isn’t. With tougher regulation on the very near horizon, there have already been some cases where the SEC has demanded refunds on token sales that have not implemented these processes. Don’t think it’s that important? Just ask Protostarr; they’ll tell you.
2. If you don’t implement KYC you may not be able to get on the most reputable cryptocurrency exchanges. So, not running checks in the short term could hurt your potential profits in the long run. In fact, Bitcoin exchange, GDAX, that’s backed by the New York Stock Exchange, only lists a fraction of the thousands of tokens out there.
3. Know your customer gives you credibility. It will also allow you to meet banking and regulatory compliance as a precursor to anti-money laundering requirements.
4. You’ll be able to reach a larger audience. Not all jurisdictions require KYC, but the number is steadily growing and there are many places with a lot of investors that already require it. America, Britain, and Canada, to name a few.
5. Remember that the US dollar is still the world’s reserve fiat currency. Even banks outside of the USA are following their lead when it comes to crypto regulations, and violating US rules for global banks isn’t an option.
Complying with KYC voluntarily gives you many advantages and it benefits your customers as well. It may feel like an extra layer or a tightening of freedom, but if you’re serious about attracting investors who are rightly concerned about their money, KYC is a logical step.