Chainalysis estimates that the global adoption rate of digital currencies rose by 880% in 2021. Undoubtedly, millions of users are eager to understand and invest in this vast industry. The massive attention is, however, attracting multiple regulatory interventions which compel the use of KYC procedures. Without a clear framework, such policies end up affecting the digital asset economy. The following article, therefore, hopes to give an insight into how KYC may limit cryptocurrency mass adoption. What is KYC? Know Your Customer, commonly known as KYC, refers to processes that analyze a user’s identity. This procedure allows financial institutions and digital asset platforms to examine a customer’s background as they extend their services. Generally, users have to submit their personal data to access a crypto platform’s services. KYC serves as a safety mechanism that eliminates bad actors from committing any financial crime. Such crimes may include activities like money laundering, illegal trafficking, terrorist financing, and many more. How KYC Limits Cryptocurrency Mass Adoption KYC may affect the acceptance rate of digital currencies in the following ways: 1. Impersonation A number of crypto-based projects may ask for private user-data to access their products. Once this information falls into the wrong hands, cases of impersonation may begin to spread. By definition, impersonation involves the act of stealing a user’s data ...
