India’s cryptocurrency market has witnessed exponential growth throughout the years, with millions of people in India exploring the world of cryptocurrency, According to reports from blockchain research firm - Chainalysis, India tops the global cryptocurrency adoption index in terms of high usage of centralized exchanges (CEXs) and decentralized Finance (DeFi), As the market grows, also the risk associated with cryptocurrencies transactions like money laundering, terrorist financing, and other illegal activities grows.
These crimes are often under the shadows of anonymous transactions, highlighting the importance for strong security measures. That’s where KYC comes in preventing illegal activities.
In this article we will discuss the following:
🔸 What is KYC?
🔸 Why do crypto exchanges in India need kyc to open an account?
🔸 Documents required for KYC in India
What is KYC?
KYC stands for “Know Your Customer.” It is a standard verification process originated in the traditional banking sector to tackle illegal activities. First introduced in India by the Reserve Bank of India (RBI) in 2002, KYC guidelines are mandatory for financial institutions to know & verify the identity of their customers before allowing them to engage in any kind of transactions.
Today with the rise of cryptocurrency, KYC has become important in the crypto industry, worldwide the crypto exchanges uses “Know Your Customer” procedures to identify and verify their customers' identities before allowing them to use their services after registration on their exchange.
Why do crypto exchanges in India need KYC to open an account?
In India, all financial institutions including crypto exchanges are required to follow the KYC procedure as part of the Anti-Money Laundering (AML) laws and regulatory requirements by the Financial Intelligence Unit (FIU) under The Prevention of Money Laundering Act, 2002 (PMLA). KYC not only ensure compliance but also prevents the financial system from being exploited for criminal purposes.
KYC helps crypto exchanges to keep the platform and its customers safe by combatting different kinds of illegal activities:
It stops money laundering by making sure the money put into the exchange comes from a real source.
It also plays a key role in tackling terrorist funding by watching and finding any odd or big transactions that might link to crime groups.
KYC also makes it harder for bad guys to steal identities, which means bad guys can't make fake accounts to cheat people.
How KYC protect users & What are documents required for KYC verification
KYC isn't just a compliance thing; it plays a crucial role in keeping users safe from online risks. It helps in preventing phishing scams, identity theft, and unauthorized transactions. KYC also provides users with confidence in their account security and ensures compliance with legal regulations, offering peace of mind in cryptocurrency trading.
In India, to complete KYC verification on crypto exchanges, you need to provide documents that prove who you are and where you live. The documents you need include:
Identity Proof: To prove your identity you can use an Aadhaar card, PAN card, or passport.
Address Proof: To confirm your address you will need to provide utility bills like electricity, water or recent bank statements.
Selfie with ID Document: To verify it requires take a selfie while holding your ID.
Make sure your documents are accurate and updated. Inaccuracy in documents can slow down verification process.
Now that you know what is kyc and why crypto exchanges in India need kyc to open an account. For instance, let’s take a small guide on how to KYC on exchange like Binance:
To complete KYC on Binance, users need to - sign up and create an account,
verify their email and phone number, -upload their ID and address proof, such as an Aadhaar card or passport.
For a complete guide visit: https://www.binance.com/en/support/faq/how-to-complete-identity-verification-for-a-personal-account-360027287111
Final thoughts on KYC “Know Your Customer” and its importance:
KYC is an important part of the cryptocurrency industry in India to maintain regulation and prevent the misuse of cryptocurrency.
