Identity Verification Procedures Used By The Top 5 Crypto Exchanges
Melissa IN Team | |
Cryptocurrency is relatively young in the financial ecosystem but it has grown rapidly. As of 2021, there were over 300 million crypto users in the world. Many businesses have started accepting cryptocurrency as payment but most investors still use cryptocurrency to build assets akin to those held in the stock markets. As acceptability rises, so does the need for cryptocurrency exchanges to protect themselves and their clients.
Identity Verification And Cryptocurrency
The same Bitcoin that was valued at $1 in February 2011 is now worth over $ 37,000. As the value of cryptocurrency increases, it becomes attractive not just for investors but also for fraudsters. The losses incurred by cryptocurrency investors and users have increased from $1.5 billion in 2020 to $10.5 billion as of November 2021. This includes losses from phishing attacks, payment fraud, transfer fraud and a variety of other scams.
Identity verification is the simplest way for cryptocurrency exchanges to balance convenience with security and compliance. Typically, this works by comparing the identification proof submitted by a user with records held by reliable third-party databases. Identity verification may be required when opening a new account as well as while buying or selling cryptocurrency.
Let’s take a look at some of the KYC and identity verification systems being used by the top 5 cryptocurrency exchanges.
Coinbase is a digital currency wallet and platform based in the USA with over 56 million users. It is the first major cryptocurrency exchange to go public. Coinbase asks users to verify their identity from time to time by uploading a photograph of accepted identity documents. If an individual is locked out of his/ her account, they must submit an additional “selfie” for account recovery. Based on the type of verification used, Coinbase sets limits for each account.
Kraken is another popular American cryptocurrency exchange. The platform allows people to trade in 50+ tokens as well as certain currencies such as U.S. Dollars, Canadian Dollars, British Pounds, and the Japanese Yen. Users can choose between 4 account levels; Starter, Express, Intermediate and Pro. Users must complete additional verification at each level to advance from Starter to Pro level.
- Starter Level: Users must share their full name, date of birth, street address, phone number and email address.
- Express level: Users must also verify their occupational information. US citizens must verify their Social Security Number.
- Intermediate level: Users must provide a valid ID and proof of residence.
- Pro level: Users must complete a KYC questionnaire and enable 2-factor sign-in authorization. Users from the USA and South Africa will also need to upload a photograph of their faces.
Verification for the Starter, Express and Intermediate levels takes no more than a few minutes but verification at the Pro level can take up to 5 days.
In terms of daily trading volumes, Binance is considered the largest cryptocurrency exchange in the world. It was initially founded in China and has since moved its headquarters to Seychelles. It offers trading opportunities in over 500 cryptocurrencies and tokens including its own token Binance Coin (BNB). Users can choose between a Basic, Intermediate and Advanced level account. As the deposit and withdrawal levels increase with each level so does the verification requirement.
- Basic level: Users must submit their full name, address, nationality and date of birth
- Intermediate level: Users must submit the above details and upload a photograph of a valid ID card, driver’s license, passport or any other form of identity documentation.
- Advanced level: In addition to the above, users must also submit proof of address. This could be a copy of their utility bill or a bank statement.
When it comes to trading Bitcoins against the American dollar, Bitfinex is the largest cryptocurrency exchange. In addition to Bitcoin, it allows users to trade in 38 currencies and tokens. Bitfinex also provides margin funding, margin trading and an over-the-counter (OTC) market for trades over a certain value. As with Kraken and Binance, the verification required is dependent on the account level.
- Basic: Users must submit a valid email address
- Basic Plus: Users must upload a copy of their official photo ID, phone number and a selfie.
- Intermediate: Users must submit proof of their street address and upload a second form of official photo identification. They must also complete a KYC questionnaire and declaration.
- Full: Finally, to activate the full level of verification, users must also submit a copy of their recent bank statement.
OKex outranks all the other cryptocurrency exchanges in terms of the trading volume. It is based in Hong Kong and has users across the globe. OKex offers trading and mining opportunities. While identity verification is not mandatory for trading or depositing cryptocurrency on OKex, it is needed for withdrawals and buying cryptocurrency with fiat currency. There are 3 levels of verification required for individuals. While Level 1 verification happens in real-time, levels 2 and 3 may take a few days.
- Level one: Here users must enter their name, ID number and nationality.
- Level two: Users must upload a photo of an ID document that has their photograph on it and a real-time selfie.
- Level three: Users must read through the disclaimer and accept the terms and conditions.
The Bottom Line
Many have compared the rise of cryptocurrency to the gold rush of the Wild West. Everyone wants to make a profit and as interest grows, both users and currency exchanges will need to take additional steps to protect themselves.
Identity verification is the foundation of building a safe trading atmosphere. With the many data verification and enhancement tools available today, exchanges can quicken their verification response time to make the onboarding and trading process as friction-free as possible. Verifying that the individual is who he or she claims to be can build trust between the user and the platform while minimizing the risk of fraud. It protects the customers as well as the platform’s reputation and ensures compliance with KYC and AML regulations. It’s a win-win for everyone.