Sunday, December 26, 2021

The Truth about KYC and AML Requirements?

Know Your Customer and Anti-Money Laundering requirements show up constantly in conversations regarding cryptocurrencies, specifically with ICOs and exchanges but many are questioning the necessity of these. The money spent on compliance with KYC and AML numbers is in the billions, more than all hacks combined. Yet the argument is surfacing that this money spent is no better than a fraud due to the few successes the platform has had, especially considering the large investment needed by companies.

Pushing for change in these laws would mostly be futile as there is a strong rationale on paper, and governments across the globe have used it for 40+ years. But for the ability to create a more intuitive future in finance, it may be necessary for some changes to be made.

These requirements started back in the 1970s with the passage of the Bank Secrecy Act in the United States. Since that time, the policies have spread throughout the world, and now almost every country has some form of law set in place. This brought in a level of surveillance that was unprecedented in the financial sector and has only grown to this day.

KYC and AML Requirements

Restrictions in place due to KYC and AML laws have hurt entire countries due to associated risks with their currency and economic standing. They have also hurt the ability for creative products to surface as they are bogged down by red tape often. Services are constantly being reformed not only for cryptos but in all of finance due to these strict laws.

These rules are in place as they are supposed to protect users and ensure people are who they say they are. It is a step in the fight against drug trafficking, insider trading, and other crimes. There are few to no stats that show how truly effective these laws are, though, despite their lengthy history. With this opaqueness, crypto users and researchers are beginning to push back and hope for the requirements to lessen, at least until data is shown that KYC and AML do provide value for the investment needed.

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