Anonymity vs. KYC: The Pros and Cons of Cryptocurrency Exchanges

[AmoreJaz]

(....)
So, what are your thoughts on exchanges with and without KYC? Do you prefer exchanges with strict KYC requirements, or do you value anonymity and privacy more and prefer to use exchanges with little to no verification process? What are the disadvantages and advantages of each approach? And what measures do you take to ensure your anonymity when exchanging cryptocurrencies?

With the birth of decentralized exchanges (DEX) now, it's now very easy to trade without even signing up for some exchanges.
But there are some people who prefer using centralized exchanges and are not comfortable using decentralized exchanges.
About KYC, seems this is becoming normalized for some people, but to be honest, I really find it annoying and am afraid to trust my personal identities for some people, it's invading my private data.

well, if you are doing p2p trading to convert your crypto directly to fiat, you will use top exchanges like binance. and binance has kyc requirements. i would rather undergo the binance's kyc requirements rather than trust a third party site where you have no idea if you can ever get your money safely. so in this case, it depends on the person himself about his preferences. sure there are pros and cons in both types of trading platforms, anonymous and with kyc requirements. but you need to weigh the possibility of getting out your funds safely.

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[sheenshane]

That's why it remains an issue of trust before using a platform and the options to KYC is always left with you.

I tend to agree with this.

Both of them have a downside whether it's DEX or CEX, if you will entrust your private documents in any exchange make sure about their trust issue.  Many people now are convenient in using CEX because they can able reach out to the team when they have a problem but in DEX, once you have a mistake, it's unrecoverable. 

In a case of anonymity, it's clearly CEX is very dangerous, but I don't see it when it comes to reputable or top exchanges.
It might be an unpopular exchnage has an issue of a data breach not being on top exchange.

[EXMON]

It is possible to purchase someone else's identity on the dark web for just a few dollars, which includes all the necessary information about that individual. The reason for the low price is due to the abundance of offers and available documents.

One might wonder where these criminals acquire so many documents to sell at such a low cost. The answer lies in the leakage of sites and their respective documents. If these platforms did not require their users to provide documents, then there would be nothing to steal.

Therefore, the KYC actually contributes to fraud, albeit indirectly, and does not provide protection against it.


The list of some known data breaches of companies where users underwent KYC in the past:
As you can see, these are all large and well-known companies that, according to some, can be trusted.

    Uber: In 2016, hackers gained access to the personal information of 57 million Uber riders and drivers, including names, email addresses, and phone numbers. KYC information was not compromised in this breach.

   Equifax: In 2017, hackers gained access to the personal information of 143 million people, including Social Security numbers, birth dates, and addresses. The breach also affected KYC data of some customers, including driver's license numbers.

   Cathay Pacific: In 2018, hackers gained access to the personal information of 9.4 million customers, including passport and identity card numbers. The breach also affected KYC data of some customers.

    Aadhaar: In 2018, an Indian newspaper reported that personal data of more than one billion Indians enrolled in the Aadhaar biometric identity program was compromised, including KYC information such as names, addresses, and bank account details.

    MyHeritage: In 2018, MyHeritage, a genealogy and DNA testing service, suffered a data breach that compromised the email addresses and hashed passwords of 92 million users. The breach also included the KYC data of some users, including names, addresses, and phone numbers.

    Ticketfly: In 2018, the ticket-selling platform Ticketfly suffered a data breach that compromised the personal information of 27 million users, including names, addresses, and phone numbers. The breach also included the KYC data of some users, including driver's license numbers.

    Chegg: In 2018, Chegg, an education technology company, suffered a data breach that compromised the personal information of 40 million users, including names, email addresses, and shipping addresses. The breach also included the KYC data of some users, including Social Security numbers.

    Quest Diagnostics: In 2019, Quest Diagnostics, a clinical laboratory, suffered a data breach that compromised the personal information of 11.9 million patients, including names, dates of birth, and medical information. The breach also included the KYC data of some patients, including financial information and Social Security numbers.

    Truecaller: In 2019, Truecaller, a popular caller identification and spam blocking app, suffered a data breach that compromised the personal information of 47.5 million users, including names, phone numbers, and email addresses. The breach also included the KYC data of some users, including photos of government-issued IDs.

   Telegram: In 2020, a database containing personal information of millions of Telegram users, including KYC data such as passport scans and government-issued IDs, was exposed online. It is unclear how the data was obtained.

    T-Mobile: In 2021, T-Mobile suffered a data breach that compromised the personal information of more than 50 million current, former, and prospective customers, including names, addresses, dates of birth, and Social Security numbers. The breach also included the KYC data of some customers, including driver's license information.

    Cathay United Bank: In 2021, Cathay United Bank, a Taiwanese bank, suffered a data breach that compromised the personal information of more than 1 million customers, including names, addresses, and phone numbers. The breach also included the KYC data of some customers, including government-issued IDs and financial information.


Crypto exchanges

    Bitfloor: In 2012, US-based Bitcoin exchange Bitfloor suffered a data breach in which hackers stole approximately 24,000 Bitcoins, worth more than $250,000 at the time. The hackers used the stolen data to create fake identities and take out loans in the names of several Bitfloor customers.

    Mt. Gox: In 2014, Mt. Gox, a Japan-based cryptocurrency exchange, declared bankruptcy after reporting that hackers had stolen approximately 850,000 bitcoins (worth about $450 million at the time) and other user data.

    Bitstamp: In 2015, European Bitcoin exchange Bitstamp suffered a data breach in which hackers stole the personal information of approximately 18,000 customers. The hackers used the stolen data to create fake identities and commit various forms of fraud, including phishing scams and identity theft.

    Bitfinex: In August 2016, Bitfinex, a popular cryptocurrency exchange, reported that hackers had stolen 120,000 bitcoins (worth about $72 million at the time) and other user data, including names, email addresses, and encrypted passwords.

    Bithumb: In June 2017, South Korean exchange Bithumb suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers. The hackers also stole more than $1 million worth of various cryptocurrencies.

   Coincheck: In January 2018, Coincheck, a Japanese cryptocurrency exchange, reported a security breach in which hackers stole over $500 million worth of cryptocurrency, as well as customer data, including names, addresses, and dates of birth.

    Bitflyer: In November 2018, Japanese exchange Bitflyer suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers.

   Cryptopia: In January 2019, Cryptopia, a New Zealand-based cryptocurrency exchange, suffered a security breach in which hackers stole cryptocurrency worth millions of dollars, as well as customer data, including email addresses and encrypted passwords

  Binance: In 2019, a hacker stole the KYC information of an unknown number of customers, including photos of passports and government-issued IDs.

  BitMEX: In 2020, crypto derivatives platform BitMEX was sued by US regulators for various charges, including failing to take appropriate measures to protect customer personal data. The lawsuit alleged that BitMEX's lax security measures resulted in hackers being able to access and steal the personal data of thousands of users, which was subsequently used for various crimes, such as phishing and identity theft.

   KuCoin: In September 2020, KuCoin, a Singapore-based cryptocurrency exchange, reported a security breach in which hackers stole over $200 million worth of cryptocurrency, as well as customer data, including email addresses and private keys.

    Celsius Network: In August 2021, crypto lending and borrowing platform Celsius Network suffered a security breach in which hackers stole customer information, including names, email addresses, and phone numbers. No funds were stolen in the breach.

   FTX: In 2022, FTX announced that a hacker had gained unauthorized access to one of their databases and had stolen customer information, including names, email addresses, phone numbers, and physical addresses.


Other
    Ledger: In July 2020, hardware wallet manufacturer Ledger suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers. The hackers also published a list of over a million email addresses associated with Ledger products.

    Upbit: In November 2019, South Korean exchange Upbit suffered a security breach in which hackers stole more than $50 million worth of various cryptocurrencies.

    Zaif: In September 2018, Japanese exchange Zaif suffered a hack in which hackers stole more than $60 million worth of various cryptocurrencies.

    ShapeShift: In April 2016, crypto exchange ShapeShift suffered a hack in which hackers stole more than $200,000 worth of various cryptocurrencies.

    GateHub: In June 2019, crypto wallet service GateHub suffered a hack in which hackers stole more than $10 million worth of various cryptocurrencies.

    Bitrue: In June 2019, crypto exchange Bitrue suffered a hack in which hackers stole more than $4 million worth of various cryptocurrencies.

    Livecoin: In December 2020, crypto exchange Livecoin suffered a hack in which hackers took control of the exchange's servers and stole more than $2 million worth of various cryptocurrencies.

    YoBit: In January 2021, Russian exchange YoBit suffered a hack in which hackers stole more than $5 million worth of various cryptocurrencies.

    Liquid: In August 2021, crypto exchange Liquid suffered a hack in which hackers stole more than $94 million worth of various cryptocurrencies.

    Poly Network: In August 2021, decentralized finance (DeFi) platform Poly Network suffered a hack in which hackers stole more than $600 million worth of various cryptocurrencies.

    Cream Finance: In August 2021, DeFi protocol Cream Finance suffered a hack in which hackers stole more than $29 million worth of various cryptocurrencies.


Please note that this is not an exhaustive list, and there may be other data breaches and leaks that have not been made public or widely reported.

[o_e_l_e_o]

i would rather undergo the binance's kyc requirements rather than trust a third party site where you have no idea if you can ever get your money safely

If you use a proper DEX like Bisq, then your money is never deposited to a centralized wallet. They never have control over your coins and so there is never any concern about getting your money out safely. This is in stark contrast to any centralized exchange, which takes full and completely ownership of your coins as soon as you deposit, both practically and legally speaking, and can do anything they like with them.

Many people now are convenient in using CEX because they can able reach out to the team when they have a problem but in DEX, once you have a mistake, it's unrecoverable.

Using Bisq as an example again, there are both mediators and arbitrators who can get involved in the case of any mistakes or disputes. You will find them much more responsive and much more helpful than any centralized exchange's support desk.

Therefore, the KYC actually contributes to fraud, albeit indirectly, and does not provide protection against it.

QFT.

[SirLancelot]

That's why it remains an issue of trust before using a platform and the options to KYC is always left with you.

I tend to agree with this.

Both of them have a downside whether it's DEX or CEX, if you will entrust your private documents in any exchange make sure about their trust issue.  Many people now are convenient in using CEX because they can able reach out to the team when they have a problem but in DEX, once you have a mistake, it's unrecoverable. 

In a case of anonymity, it's clearly CEX is very dangerous, but I don't see it when it comes to reputable or top exchanges.
It might be an unpopular exchnage has an issue of a data breach not being on top exchange.

Mistakes can be prevented with proper practice but we can never prevent a centralized exchanges from controlling us. It's much worse to lose your money because the exchange scams you than you lose it because of a mistake.

This is why decentralized exchanges are still a better choice that the majority must use. It doesn't matter if the exchange is reputable or not, or they will sold your data's or not but once you submit your KYC to them, it automatically kills your privacy. Even a simple sign-up on a centralized exchange will still require our sensitive details such as emails or phone numbers which is not very far from doing a KYC.

[Hamphser]

That's why it remains an issue of trust before using a platform and the options to KYC is always left with you.

I tend to agree with this.

Both of them have a downside whether it's DEX or CEX, if you will entrust your private documents in any exchange make sure about their trust issue.  Many people now are convenient in using CEX because they can able reach out to the team when they have a problem but in DEX, once you have a mistake, it's unrecoverable. 

In a case of anonymity, it's clearly CEX is very dangerous, but I don't see it when it comes to reputable or top exchanges.
It might be an unpopular exchnage has an issue of a data breach not being on top exchange.

Mistakes can be prevented with proper practice but we can never prevent a centralized exchanges from controlling us. It's much worse to lose your money because the exchange scams you than you lose it because of a mistake.

This is why decentralized exchanges are still a better choice that the majority must use. It doesn't matter if the exchange is reputable or not, or they will sold your data's or not but once you submit your KYC to them, it automatically kills your privacy. Even a simple sign-up on a centralized exchange will still require our sensitive details such as emails or phone numbers which is not very far from doing a KYC.

Even though on how much we do hate up CEX and recommend DEX but still there are really lots of ways on why these centralized and regulated platforms had been loved by most many of us, this is why we could

able to trade up directly in between coins with ease due to lots of pairs and could be able to convert it to fiat without any hassle.We do know that we cant directly purchase out a crypto via
these decentralized exchange and this is why we would really be still touching up this area because this is the only way we could acquire coins excluding on that p2p itself.

If you do mind off about anonymity but touched up these CEX's then you would really be needing up to give up that anonymity that you are protecting into.

[tjtonmoy]

So, what are your thoughts on exchanges with and without KYC? Do you prefer exchanges with strict KYC requirements, or do you value anonymity and privacy more and prefer to use exchanges with little to no verification process? What are the disadvantages and advantages of each approach? And what measures do you take to ensure your anonymity when exchanging cryptocurrencies?

I do like to keep my privacy safe and avoid KYC, but the top exchanges make it mandatory to do your verification. I know there are many ways those exchanges can avoid the mandatory KYC verification, but they won't do it. And if we are to use the best one out there, we have to go by the rules and do it anyway. I don't think that's fair. Data breach has been an issue for a long time now, but as we have to use it anyway, then better to choose the best one out there. Those which got a good reputation, I won't mind sharing my personal info, tho I feel kinda unsecure doing it too. I would be good to have a decentralized exchange (there are many already out there). But they don't seem appealing to me to put my trust in them.

[Potato Chips]

Privacy matters aside, identity verification/KYC can be a very inconvenient process. 

For instance, you can do all the basics DOs and DON'Ts e.g. photo should be clear, text should be readable, etc. and still fail. There should be lots of threads complaining about how they have to try multiple times. There were also cases where people have to wait for days to be approved, worse is if the software can't verify them and they have to be put thru manual verification which is a longer process. This reason alone is enough for me to prefer no-kyc ones since I don't need to be subjected to any of that.

[dothebeats]

KYC does good things, but they also pose a lot of harm to those submitting the KYC itself. A lot of data breaches in the past have been recorded inside and outside the cryptocurrency space. It makes up for a perfect recipe for spying people and their activities. You are giving your identity to these entities hoping that you'll get accepted to their platforms and services. What happens when these entities get hacked? Your identity is at risk of getting used by other people in malicious activities. Who gets the repercussions? Of course, no one else but you.

[el kaka22]

I really do not trust the exchanges without any KYC at all, I mean there are so many laws that bans exchanges to not ask for KYC at all, which means that if we are depositing our money into an exchange that doesn't ask for KYC, that means they are working outside of the law and in that case how could we truly trust them?

However the ones that ask your KYC, even though annoying it might be, working with the officials to make that happen, otherwise why would they need your KYC, not to put your face on their bedroom wall, which means that they are at least a bit more credible, such as if anything happens they may go to jail, just like how FTX screwed up, but didn't get away with it, knowing that prevents scammers a lot.

[Mahanton]

I really do not trust the exchanges without any KYC at all, I mean there are so many laws that bans exchanges to not ask for KYC at all, which means that if we are depositing our money into an exchange that doesn't ask for KYC, that means they are working outside of the law and in that case how could we truly trust them?

However the ones that ask your KYC, even though annoying it might be, working with the officials to make that happen, otherwise why would they need your KYC, not to put your face on their bedroom wall, which means that they are at least a bit more credible, such as if anything happens they may go to jail, just like how FTX screwed up, but didn't get away with it, knowing that prevents scammers a lot.

Even with those verified or regulated platforms cant really be fully trusted 100% but it is way more better compared into those platforms which arent that regulated. Come to think that there are even
platforms as of this moment that arent asking for some verification but still you could be able to make use of their site features if you are really that intending to deal up with crypto space.
Regulation do really come tighter as the years passing by and its not surprising that we do really becomes even more stricter for whatever things that deals up something with money.
You would expect that government would really be always loving to have involvement.

[Wiwo]

Despite submitting details for KYC, there is yet the human factor of third party that ask for different levels of verification any time you are accessing the such platform and that is against the spirit of cryptocurrency or decentralized operations. I prefer the spirit that blockchain is the technology for freedom and personal responsibility and not third-party interference.

KYC may be against the spirit and practice of decentralization, but then we can not totally elude the importance of KYC to centralized platforms and cryptocurrency services providers, such as exchanges, first, they need to comply with government regulations for them to be able to get licensed, and since the government already know the risk of allowing crypto transactions on exchange to go unchecked, it's paramount for them to strictly follow the kyc mandate.
-But the user on the other hand has the right to choose between KYC and none KYC and this all balls down to how the individual perceives his privacy.

[EXMON]

Don't you think it is essential to preserve the user's freedom of choice, as it is the basis of individual freedom? By denying this fundamental right, we deprive ourselves of a part of our freedom that is already diminishing more and more.

If we continue to accept these restrictions on our freedom, it is highly likely that we will lose all the freedoms we had 10 to 30 years ago. We risk ending up under totalitarian control, where each of our movements will be monitored and controlled. Is this really what we want for our future and that of our children?

We ourselves have a share of responsibility in the establishment of this control. By choosing the easy path and accepting convenience at the expense of our freedom, we have allowed those in power to seize our most fundamental rights. We must be aware of this and take the necessary measures to restore our individual freedom.

Cryptocurrencies were supposed to be an alternative to state control, by offering anonymity and privacy protection. But we have abandoned this idea and turned to more practical solutions, without considering the long-term consequences.

It is time to wake up and fight for our individual freedom, by rejecting any form of government control and surveillance. We must reaffirm our right to privacy and freedom of choice, to preserve the democratic values that make our societies strong.

[tygeade]

what are your thoughts on exchanges with and without KYC? Do you prefer exchanges with strict KYC requirements, or do you value anonymity and privacy more and prefer to use exchanges with little to no verification process? What are the disadvantages and advantages of each approach? And what measures do you take to ensure your anonymity when exchanging cryptocurrencies?

I get that our data could be hacked and be shared, and I am willing to take that risk. People think that KYC is just there for exchanges to comply with government requests and nothing more, which is very wrong.

KYC is there to protect you, in case someone tries to hack into your account, if you have KYC enabled that means you could provide proof that you are in fact you, whereas hackers won't be able to, because being able to hold a piece of paper that has that days date is not something they could replicate. Hence, having KYC, even with all the risks involved is still better for me and makes me feel a lot better about it in the long run.

[o_e_l_e_o]

I really do not trust the exchanges without any KYC at all, I mean there are so many laws that bans exchanges to not ask for KYC at all, which means that if we are depositing our money into an exchange that doesn't ask for KYC, that means they are working outside of the law and in that case how could we truly trust them?

Because you aren't supposed to deposit your money to an exchange at all. Proper DEXs let you trade peer to peer, and there are no centralized wallets in which to deposit your coins. Since the exchange never has control of your coins, there is no trust required. The fact that so many people think you must give up all control of your coins to a third party in order to trade them is a triumph of centralized exchange's marketing departments, but a complete falsehood. And I have no idea how anyone can seriously question how you can trust a proper DEX when literally no trust is required, while at the same time saying that CEXs are more trustworthy, despite the fact that dozens of CEXs have collapsed and gone bankrupt in the last few months because they were stealing/gambling/spending users' coins without their knowledge or consent.

CEXs are the least trustworthy platform in existence.

KYC is there to protect you, in case someone tries to hack into your account, if you have KYC enabled that means you could provide proof that you are in fact you, whereas hackers won't be able to, because being able to hold a piece of paper that has that days date is not something they could replicate.

So you are willing to give up all your privacy, give up the security of your coins, risk your documents being sold on the dark web, risk your identity being stolen and being accused of money laundering and fraud, all because you can't be bothered to enable 2FA on your exchange account? Wow.

[maydna]

Don't you think it is essential to preserve the user's freedom of choice, as it is the basis of individual freedom? By denying this fundamental right, we deprive ourselves of a part of our freedom that is already diminishing more and more.

If we continue to accept these restrictions on our freedom, it is highly likely that we will lose all the freedoms we had 10 to 30 years ago. We risk ending up under totalitarian control, where each of our movements will be monitored and controlled. Is this really what we want for our future and that of our children?

We ourselves have a share of responsibility in the establishment of this control. By choosing the easy path and accepting convenience at the expense of our freedom, we have allowed those in power to seize our most fundamental rights. We must be aware of this and take the necessary measures to restore our individual freedom.

Cryptocurrencies were supposed to be an alternative to state control, by offering anonymity and privacy protection. But we have abandoned this idea and turned to more practical solutions, without considering the long-term consequences.

It is time to wake up and fight for our individual freedom, by rejecting any form of government control and surveillance. We must reaffirm our right to privacy and freedom of choice, to preserve the democratic values that make our societies strong.

The concept of anonymity is good by not exposing our identity to many places, especially places controlled by the government. But unfortunately, the government itself wants to know who its citizens are, and they pressure a lot of business places to do KYC on those who come to these business places, especially for those who do business, so that the government can find out how much their profits are and the government can collect the taxes.

There has to be a desire to use the anonymity of everyone and turn around to pressure the government not to force KYC on everyone and let people choose what they want. But this is not easy because the government will not allow it.

[LittleBitFunny]

Both CEX and DEX have their pros and cons, there is no winner when compared to each other. If you like privacy, don't want your identity to be sold on online websites, then DEX is the choice but DEX has a lot of limitations, if you are a trader, you make money trading, then you won't be able to do that with DEX. In contrast to CEX, they provide many services as well as convenience to use, but in return, we lose privacy, and we also do not have full control over our assets. I am a trader, so I still use CEX so far, I lost my privacy but in return, I feel satisfied with cex's services.

[EXMON]

Both CEX and DEX have their pros and cons, there is no winner when compared to each other. If you like privacy, don't want your identity to be sold on online websites, then DEX is the choice but DEX has a lot of limitations, if you are a trader, you make money trading, then you won't be able to do that with DEX. In contrast to CEX, they provide many services as well as convenience to use, but in return, we lose privacy, and we also do not have full control over our assets. I am a trader, so I still use CEX so far, I lost my privacy but in return, I feel satisfied with cex's services.

Change is inevitable, and it's no different in the world of cryptocurrency exchanges. With KYC becoming a necessary requirement for trading on most platforms, it's important to consider what the future may hold. As the need for security and safety increases, it's not hard to imagine that biometric data, including DNA, may be the next step in the evolution of exchange compliance. Are you prepared to adapt to these changing requirements?

[tbct_mt2]

The list of some known data breaches of companies where users underwent KYC in the past:
As you can see, these are all large and well-known companies that, according to some, can be trusted.

Large or small companies, when we send our documents to them, we lose those things on Internet forever except if we can have a time traveling machine to correct our mistakes or past activities.

I don't know all companies and their data breaches in your list that is big but I am not surprised at all. They have lot of Terms in their Terms of Service that are set to protect their companies, not their customers.

Like all those data breaches, did any victim (among their customers) receive compensation from those companies? No, and worse, customer data were breached forever.

[death69]

what are your thoughts on exchanges with and without KYC? Do you prefer exchanges with strict KYC requirements, or do you value anonymity and privacy more and prefer to use exchanges with little to no verification process? What are the disadvantages and advantages of each approach? And what measures do you take to ensure your anonymity when exchanging cryptocurrencies?

I get that our data could be hacked and be shared, and I am willing to take that risk. People think that KYC is just there for exchanges to comply with government requests and nothing more, which is very wrong.

KYC is there to protect you, in case someone tries to hack into your account, if you have KYC enabled that means you could provide proof that you are in fact you, whereas hackers won't be able to, because being able to hold a piece of paper that has that days date is not something they could replicate. Hence, having KYC, even with all the risks involved is still better for me and makes me feel a lot better about it in the long run.

It's like a game of chance, really. People are out here, willin to take on the unknown and untested by tradin on unverifid exchangis with no KYC. They assum that it's a good ideea to avoid givin out their persnal informashun, but hav they really thought it through? Wat if somethin goes rong, like some hacker decides to take a swing at their account and runs off with all their hard-earned cash? Without KYC, how will they prove ownershp of the account? It's a precarious balancing act, sure, but ya need to be smart and take the risk. It's like when ya ride a bike; ya may think helmets arent kool, but they're necessary to keep ya from gettin hurt. So, before ya sign up for that sketchy unverified exchange without KYC, take a minute and consider that enablin KYC is a constructive and creativ way to keep yourself safe from any security breaches.