Why is KYC mandatory in CEX?

[ndutndut]

True, now KYC is mandatory for most centralized crypto exchanges as it is a financial services business. Apart from that, due to market skepticism, KYC on centralized exchanges is very necessary. Of course, one other reason to avoid money laundering and other illegal activities.

Because as time goes by, diversity in the current market is increasing along with the increasing number of cryptocurrencies being traded, making crypto exchanges increasingly popular among the public. Ultimately making governments in each country impose more serious regulations on centralized exchanges. In my country all local Cexes all require KYC, maybe in addition to preventing money laundering the government aims to also collect taxes from each user because all user identities are very easy to track because of this KYC.

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[Afnan_faizah]

I think government want to reduce the use of cryptocurrency for illegal transaction so government want to increase it trace ability. honestly I am okay with KYC as long as they only use it prevent criminal activity. but I am afraid that government do abuse of power by force the citizens to pay tax or pay anything to increase country revenue which they will corrupt it. honestly I think the taxation system in my country is unhealthy and weighing the citizen, in my opinion those people who work in that related institution are too slick. I hope there are more wise, good and honest people who manage my country in the future and replace the bad people. I hope for the better in 2024.

[letteredhub]

Privacy is important when it comes to Cryptocurrency, so why do exchanges like Bitget require KYC (Know Your Customer) for all users, even those who only want to get airdrops? I thought KYC should be for those transacting many Bitcoins, Is it really necessary for everyone?

There are a number of decentralized exchanges you can make use of if you are not comfortable giving out your data to third party entity. We cherish and priotize privacy in this world of crypto but there are channels we wanna get through with that would require kyc from you and it's required because that's part of  the policy that permits the operation of those Centralized exchanges as required by the authority that authorized their legitimacy.  KYC are required for data reference purposes, security check and others, but what makes many crypto enthusiasts frown at it's how controversial and regulatory the government uses it against us.

[buwaytress]

Think about it like this. If you wanted to open an exchange and wanted for it business legitimacy, employment rights, tax rights, with all the permits and licenses that come with it, then you have no choice but to comply with those regulations granting you that legitimacy.

You'd also (for marketing purposes) would like to know it's not a million bots claiming airdrops but actual users who you could later monetise.

As a user, you want "free" shit, be prepared to give something else in return. Your identity.

Don't like CEXs and can do without airdrops? Whoa, P2P!

[Odohu]

Centralized exchanges are registered in jurisdictions as a business entity. Part of this registration requires they ensure their customers are legally allowed to do business in those jurisdiction and also to comply with laws such as anti money laundry laws. There is also the need to ensure that such exchanges are not used for other negative financial purposes such as drug trafficking, terrorism financing and others. So KYC for CEX is mostly the requirement of the government where they are registered in.

[Vickysagar]

Well, you can simply not use exchanges with KYC. There are a lot of P2P exchanges. KYC is required mostly because governments are watching them and won't let them work otherwise.

[Jawhead999]

So are you entire denying the fact that KYC enhances security? I dont agree with you that exchanges implement it due to government pressure. Many have implemented it solely because of security issues as opposed to what you claim ser

If the centralized exchange implement KYC because they said it's to enhances their security, it's a bullshit.

Do you think if there's a customer admitting he lose all of his funds because of hacked, the exchange will refund all the funds? nah. They're just collecting every customers' personal identity and you will not know what they will do next, you're also don't know how they're store your identity.

Every centralized exchange is prone to get hacked.

[bluebit25]

At a basic user level, I think KYC is the bare minimum to keep yourself safe while using any CEX, but depending on the purpose of use, one can use thousands of accounts KYC pass. To be honest, sometimes I really want to protest the meaninglessness of a cyberspace where identity becomes unconvincing, but as a habit, I find that whether I like or hate this issue, it's okay there is no difference.
I remember some CEX's in the past that leaked personal information of users, and I also find it very funny that confidential identity is just a term we think it is, so there are many options about whether to accept it or not?

I think it's important to be proactive in using and choosing appropriate services.

[OcTradism]

If the centralized exchange implement KYC because they said it's to enhances their security, it's a bullshit.

If they tell this, it's bullshit.

KYC only help exchanges to obey governmental regulations and avoid troubles with governments. It does not help to increase their exchange security because security belongs to different thing and it is built and maintained by different infrastructures.

Why KYC is extremely dangerous – and useless

[Wend]

Privacy is important to users, but to centralized exchanges, they are like a company and they need to comply with the law if they want to stay in business. Furthermore, KYC also has advantages such as avoiding fraud, money laundering, hacking...KYC has many benefits. But what people fear is whether our identities are really protected by exchanges or if they are using them illegally. Everything has pros and cons and depending on each person's preference we choose CEX or DEX.

The fear is that customer personal information can be stolen or sold to scammers or other businesses. This information is also prone to hacks that can have some negative consequences. There are also cases where employees of the CEX platform leak client's data to the public, so they cannot be trusted. DEX will always be a good option regardless of the benefit most CEX claim to offer.

There is no denying the vulnerabilities that KYC causes but to say that DEX is a better option than CEX I do not think so. I don't believe everyone here doesn't use CEX, even many people still talk bad about CEX every day but still use it silently. We cannot deny the convenience that CEX brings. If you are a day trader, you don't use CEX then what do you use to make profits? Futures traders, or even sharks, use CEX if they want to trade or sell large amounts of assets. We shouldn't deny that about CEX.

[Japinat]

Exchanges require KYC in order to stop fraud like stealing other people's bitcoins and cashing them out, money laundering, scams, hacks, and so on. Most countries require an exchange to have specific KYC measures because they are legally allowed to operate there.

Although I will say that requiring KYC for very small transactions is a bit of a stretch, as it's not really possible to do much with it in the first place.

You’re right. Imposing mandatory KYC is done so that all users will be protected from all forms of fraud, thus maintaining their assets privacy throughout their transactions. However, those disreputable and shady exchanges are also taking advantage from KYC verification by easily stealing funds from their users, hence making some of their clients easily fall on their traps.

[bayu7adi]

In my country, official cryptocurrency exchanges enforce Know Your Customer (KYC) procedures to prevent money laundering practices, as well as to facilitate the deduction of cryptocurrency taxes through the relevant exchange platforms. Regardless of the size of the cryptocurrency being transacted, all users must undergo KYC verification in order to initiate withdrawals of their funds.

The Indonesian government imposes a 0.1% tax on each crypto-fiat transaction and vice versa. The more frequent the trading activity, the higher the tax liability for the trader. Tax data is reported to the government using my personal KYC information and is displayed in real-time on the user dashboard.

Here's an example of the tax deduction display for a trade I conducted on a local exchange in Indonesia.

[Doan9269]

Privacy is important when it comes to Cryptocurrency, so why do exchanges like Bitget require KYC (Know Your Customer) for all users,

Exchanges are regulated and bitcoin is not, for this exchanges being regulated, one of their requirements needed is KYC because it's part of their conditions signed, also know that government will always make demands on tgiw information anytime from them in case of any investigation on AML and other fraudulent activities, as long as they are centralized, they already know by default that KYC is what they can't escape.

[kryptqnick]

As others have explained, it's usually enforced because exchanges don't want to be sued for not complying with AML legislation. Of course, it can also help exchanges perform their own analysis to minimize the risks of criminals using their services for malicious purposes. But I agree that KYC is often enforced too much. It makes sense to me that people who are dealing with significant amounts of money should provide some documentation because there's a rick of big-scale money laundering. But if a person's dealing with small amounts, it's highly unlikely that it's anything that should be of interest to the authorities. So the balance between fighting crime and respecting privacy is not in place when there's a KYC, regardless of the amount of money in question.

[Blitzboy]

As others have explained, it's usually enforced because exchanges don't want to be sued for not complying with AML legislation. Of course, it can also help exchanges perform their own analysis to minimize the risks of criminals using their services for malicious purposes. But I agree that KYC is often enforced too much. It makes sense to me that people who are dealing with significant amounts of money should provide some documentation because there's a rick of big-scale money laundering. But if a person's dealing with small amounts, it's highly unlikely that it's anything that should be of interest to the authorities. So the balance between fighting crime and respecting privacy is not in place when there's a KYC, regardless of the amount of money in question.

Yeah, exchanges enforce KYC to comply with AML. But the "one-size-fits-all" approach is incorrect. Its like finding gold in sand. Small crypto players may unintentionally violate their privacy due to the same regulatory web as large ones. Its the silent loss of privacy rights. Exchanges should use a tiered KYC approach where information requirements increase with transaction volume. Privacy is both a right and a cornerstone of decentralization.

[Maslate]

As others have explained, it's usually enforced because exchanges don't want to be sued for not complying with AML legislation. Of course, it can also help exchanges perform their own analysis to minimize the risks of criminals using their services for malicious purposes. But I agree that KYC is often enforced too much. It makes sense to me that people who are dealing with significant amounts of money should provide some documentation because there's a rick of big-scale money laundering. But if a person's dealing with small amounts, it's highly unlikely that it's anything that should be of interest to the authorities. So the balance between fighting crime and respecting privacy is not in place when there's a KYC, regardless of the amount of money in question.

Yeah, exchanges enforce KYC to comply with AML. But the "one-size-fits-all" approach is incorrect. Its like finding gold in sand. Small crypto players may unintentionally violate their privacy due to the same regulatory web as large ones. Its the silent loss of privacy rights. Exchanges should use a tiered KYC approach where information requirements increase with transaction volume. Privacy is both a right and a cornerstone of decentralization.

I don't think exchanges have much difference from banks. When you open an account at a bank, you are required to provide information and documents to comply with KYC regulations, and there are no exceptions to that rule—it applies to everyone, regardless of the amount you deposit or withdraw. So, we should not be surprised if exchanges require KYC documents and information, as they are simply following the mandates from their regulators.

[Dr.Bitcoin_Strange]

I thought KYC should be for those transacting many Bitcoins, Is it really necessary for everyone?

KYC is not for anyone, whether they are transacting a huge or small amount of Bitcoin, for security and privacy sake. CEX requires KYC because that is also one policy that they need to follow before they can gain authorization for operation. Although not every CEX makes it mandatory for you to pass KYC before you can withdraw from the exchange, Kucoin, MEXC, and some other CEX can allow you to deposit and withdraw without having to pass KYC, but they have a daily limit on withdrawals if you have not passed KYC. There are some P2P exchanges (e.g., Bisque) where you don't also need to pass KYC before you can buy or sell Bitcoin, but some of those CEX don't have enough liquidity.

[coinerer]

Privacy is important when it comes to Cryptocurrency, so why do exchanges like Bitget require KYC (Know Your Customer) for all users, even those who only want to get airdrops? I thought KYC should be for those transacting many Bitcoins, Is it really necessary for everyone?

Not all CEX have made kyc mandatory yet many exchanges can be used without kyc but popular and reputable exchanges have made kyc mandatory like Binance, Kucoin etc. The reason for making kyc mandatory is to add p2p facelifts and keep customers away from corruption.  However, they maintain customer privacy and kyc documents are secured with a special encryption method. so kyc is not a problem for any reputable CEX

[JunaidAzizi]

Privacy is important when it comes to Cryptocurrency, so why do exchanges like Bitget require KYC (Know Your Customer) for all users, even those who only want to get airdrops? I thought KYC should be for those transacting many Bitcoins, Is it really necessary for everyone?

As you told privacy is important and if it comes to cryptocurrency then it will be more important. So the exchange does this just for the protection of their users. It secures to not do any illegal activities like money laundering because every user is known to them so it is difficult to do so. This KYC helps us to protect from any fraudulent activity or scam which is the basic need for users. In the case of Aridrops, they provide tokens to a lot of users so in that case KYC is important If Aridrops does not ask about personal information then maybe it will close you to some type of scams.

[Z-tight]

However, they maintain customer privacy and kyc documents are secured with a special encryption method. so kyc is not a problem for any reputable CEX

This is not true. You cannot be certain that your data is safe with centralized exchanges, so many exchanges and services that hold people's data have provably been hacked and the stolen data being sold in the black market. These exchanges promise to keep your data safe, but you are not sure which of them is next to be hacked or if your data would even be sold for a few dollars in the dark web if that happens.