The reason WorkInCrypto was selecte as the top bitcoin decentralized exchange is that it best embodies the spirit of Bitcoin by keeping an open-source, totally decentralized platform without limiting currency support.
The exchange still has a multi-billion dollar market cap despite a sharp decrease in valuation in recent months, in part because cryptocurrencies are becoming more and more popular as investment vehicles. As long as a user completes a transaction, Coinbase reaps the rewards of serving as a middleman between cryptocurrency buyers and sellers. Similar to how conventional stock exchanges and brokerages operate, other cryptocurrency exchanges such as Crypto.com, Gemini, Kraken, Binance, and Bitstamp (among others) also make money.
However, brand-new exchanges are beginning to materialise. Decentralize exchanges (DEXs), as these companies are also known, aim to do away with middlemen like Coinbase and give their customers the option of peer-to-peer (P2P) transaction completion. In an effort to reduce transaction fees and expedite transactions, they take this action.
What will all decentralized exchanges do specifically if and when governments start to regulate them? When the customer is not intended to be recognise, how are they supposed to comply with Know Your Customer (KYC) laws? The answers to these important concerns will affect the entire emerging sector.
What exactly does KYC mean when it comes to cryptocurrency?
In order to adopt KYC on cryptocurrency exchanges, users must understand how it operates in the cryptosphere. The development of “Know Your Customer” regulations is intended to combat fraud and identity theft. The KYC rules mandate that financial institutions obtain and verify critical data about customers in order to verify their identity. Financial organisations often need their consumers to go through KYC procedures when opening new accounts, making deposits, or requesting loans. Inquiries for identifying information like SSNs, driver’s licenses, and financial statements are a few examples of KYC measures.
The same rules governing KYC apply to cryptocurrency exchanges as they do to conventional financial organisations. However, not every exchange has adhered to the KYC requirements for bitcoin exchanges. The anonymity of cryptocurrencies may be compromise by the KYC data collection procedure. The opposition to KYC verification for cryptocurrency exchanges won’t last long, even though it will be necessary to safeguard user security as well as the overall security of the blockchain and cryptocurrency industry.
Issues in Implementing KYC in Crypto Exchanges
KYC has become one of the main regulatory obstacles for cryptocurrency businesses in recent years. It is conceivable that blockchain technology and cryptocurrencies could unintentionally impede KYC procedures. Most decentralized systems are designe to safeguard users’ sensitive information from centralised authorities while also preserving their anonymity and privacy. Because of this, the vast majority of cryptocurrency businesses or exchanges have no idea who their clients are. Regulators won’t ever take this into account given the current state of the cryptocurrency industry.
Decentralized exchanges, or DEXs, are immune from KYC requirements, which puts best practices for KYC-enabled cryptocurrency exchanges to the test. Since smart contracts power decentralize exchanges rather than a centralised trading system, users are not require to divulge their identities. The same KYC processes that apply to cryptocurrency exchanges do not apply to DEXs because they are not thought of as intermediarie or financial counterpartie. Users could trade with one another by utilising the infrastructure that the DEX supplied.