KYC stands for “Know Your Customer.” It’s an ID check that crypto exchanges make people do before they can start trading. Coinbase won’t let anyone buy Bitcoin without seeing an ID first. The same is the case for Binance and most other major platforms.
Governments told exchanges: verify who’s using your platforms, or we will shut you down. The reason? Authorities don’t want drug dealers washing money through Bitcoin. They don’t want terrorist groups sending funds via Ethereum. So they forced exchanges to start collecting data on customers, just like banks do.
The actual process does not take long. The process takes approximately 10 minutes. Users photograph their passport or license, take a selfie, and enter their home address. Are you planning to transfer substantial amounts? Exchanges want proof of where that money came from.
KYC keeps the platforms legal. It makes abuse harder. But here’s what is lost: privacy. The anonymity that made crypto appealing to millions is gone in the KYC process. Names get attached to transactions. That information lives on the company servers that hackers can target.
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Some centralized platforms do not bother with KYC. But they can be risky then. Most people just hand over their ID because the big, regulated exchanges are safer bets than the shady alternatives.