Crypto Exchanges: Importance, Process & Benefits of Crypto KYC

Crypto Exchanges: Importance, Process & Benefits of Crypto KYC

A platform for crypto exchanges is essential to facilitate the buying and selling of cryptocurrencies such as Bitcoin and Ethereum. From a bird eye view, it appears as if there is a smooth sail in the crypto economy. There are numerous issues that need to be resolved, including security, fraud prevention, and compliance. Crypto KYC (Know Your Customer) requirements for can be quite helpful in these situations.

In this blog, we are discussing the importance of KYC in crypto, how you can complete the KYC process in crypto, and the benefits of it.

What Are Crypto Exchanges?

With the advancement of technology, online crypto exchanges or platforms offer users the opportunity to exchange virtual currencies in return for other digital currencies or traditional money like INR, USD, and EUR. We have the leisure of operating on platforms such as Binance, Coinbase, and Kraken, as well as domestically operated WazirX, CoinDCX, and ZebPay.

These exchanges underpin the crypto economy. However, especially in regulated markets like India, the implementation of KYC compliance in crypto is essential.

What is KYC in Crypto?

KYC (Know Your Customer) is a user verification procedure that crypto platforms implement to authenticate the identity of their customers. It ensures the individual using the platform is not a perpetrator of illegal acts such as money laundering, terrorism sponsorship, or identity fraud.

In numerous jurisdictions, crypto KYC has become a prerequisite and is closely associated with AML compliance.

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Process of KYC in Crypto Exchanges

The KYC in crypto exchanges steps may differ from one exchange to another; however, the most common steps are described below:

1. Account Creation

Registering an account on the exchange holds the same principles as entering your email address, phone number, and a strong password.

2. Submission of Documents

Provide identity documents such as:

• Aadhaar Card or PAN Card for India.

• Passport, Driving Licence, or National ID from other countries.

• Selfies for facial recognition and photo matching.

3. Verification of Address

Address verification through a recent utility bill or bank statement (Optional for some platforms).

4. Video KYC

Some exchanges now use video KYC or AI-based face verification to complete the verification process within minutes.

5. Authorisation

After verification, the user's account is KYC validated. Users get full access to deposit, trade, and withdraw cryptocurrency.

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Advantages of KYC on Cryptocurrency Exchanges

The implementation of KYC has multiple benefits for users as well as crypto trading platforms:

1. More Security

1 (a). Lower risk of fraud, hacks, and identity theft.

1 (b). Safer trading environment.

2. Adherence to Governance Policies

Enables exchanges to operate within the legal bounds of crypto regulatory frameworks provided by the RBI, SEBI, and globally by FATF for secure crypto trading.

3. Protection from Scams

Eliminates bad actors and the use of anonymous transactions often associated with criminal activities.

4. Access to Higher Limits

 KYC-verified accounts have access to higher deposit and withdrawal limits on cryptocurrency exchanges.  

5. Enhanced Customer Support

Account verification speeds up the resolution of account or transaction problems.  

Importance of KYC in Crypto 

With privacy given importance, one gets attracted to the decentralized feature of crypto. It can attract dishonest elements if safety measures are not taken. Governments are everywhere striving to establish a regulated environment for the use of cryptocurrency where KYC plays a major role.

In India, the Financial Intelligence Unit (FIU) has already sent compliance dry notices to global exchanges not operating under KYC norms. SEBI/RBI-compliant exchanges are always the safest option as they implement strict crypto KYC verification protocols and which is crypto regulation in India.  

 

Pros of Crypto Exchanges

Below are some essential advantages of crypto exchanges in India-

1. Easy Access to Digital Assets

Buying and selling of cryptocurrencies through crypto exchanges is very simple and straightforward. Most of these platforms have user-friendly interfaces that a new trader will have no difficulty starting in the field of crypto trading.

2. High Liquidity

Leading platforms such as Coinbase, Binance etc provide high liquidity, allowing the execution of trades at any time with minimal delays and without significant market impact on prices.

3. Diverse Trading Options

From spot trading to futures, margin, and even staking, exchanges have a variety of trading instruments to accommodate all levels of traders.

4. Real Time Market Data

Users get access to live charts, technical indicators, and order books, which assist in making informed decisions based on the real-time crypto market data.

5. Secure Storage Options

Some established exchanges provide solutions for cold storage, alongside insurance and auditing services, ensuring the user’s funds are kept secure.  

6. Regulatory Compliance

The leading exchanges implement required policies of KYC, AML, and other requisite rules, thereby granting their users compliant trading platforms.  

 

Cons of Crypto Exchanges 

Apart from advantages, crypto exchanges also have various risks that need to be evaluated before making any related decision.

1. Centralised Control

The majority of crypto exchanges are centralised, which means a single organisation holds control over your funds. This undermines the principle of decentralisation that cryptocurrency is built on and places users at risk in the event of hacks on the exchange.  

2. High Transaction Fees

There are trading fees alongside withdrawal and deposit fees, which can be especially expensive during peak trading times or while using debit and credit cards.  

3. Risk of Hacking

Many exchanges have suffered from major hacks and have lost value and data despite having security measures. 

4. Regulatory Uncertainty

The volatile laws in countries like India can impact the operations of exchanges, and in some cases, suddenly disable or limit the offered services.  

5. Privacy Concerns

KYC procedures are necessary to ensure security. But it requires personal data collection, and some users might not want to reveal their personal data,

 

Top 10 Crypto Exchanges or Platforms

Apart from the hundreds of platforms available in India and the Globe, here is the list of the top 10 crypto exchanges based on traffic, liquidity, and trading volumes, as per CoinMarketCap ranks.

Exchange	Trading Volume (24 hrs)	Avg. Liquidity	Weekly Visits
Binance	$32,864,417,821	917	9,437,627
Bybit	$5,745,592,257	718	3,495,302
Coinbase Exchange	$5,511,451,739	790	32,313
Upbit	$4,593,039,263	626	1,343,942
OKX	$4,876,021,863	771	5,208,404
Bitget	$6,008,812,923	701	2,844,490
MEXC	$7,198,861,521	657	6,861,669
Gate	$5,796,058,534	667	7,390,442
KuCoin	$2,417,369,332	736	2,584,631
HTX	$4,328,756,707	561	5,655,391

(Note- The data on this list is dynamic and subject to real-time changes.)

 

 

Binance Crypto Exchanges-

About

Emphasizing this, Binance is one of the largest crypto exchanges in the world, giving users a sizable choice, dedication, and commitment to trade on hundreds of cryptocurrencies. They had another native token by the name of BNB (Binance Coin).

 

Pros & Cons of Binance

Pros	Cons
Wide Range of Cryptocurrencies	Regulatory Issues
Low Trading Fees	Complex for beginners
Advanced Features	Lack of customer support

 

Bybit Crypto Exchanges-

About

Bybit is a popular Bitcoin exchange site. It offers trading in bitcoin futures and spot markets and is renowned for its user-friendly interface and fast execution.

 

Pros & Cons of Bybit

Pros	Cons
Enhanced features and greater market depth	Less access to fiat currencies and limited altcoin offerings
Economical fee structure with swift order processing	Significant exposure to leverage for new traders
Robust protection and available educational materials	Many countries impose restrictions; customer support is sluggish

 

Coinbase Crypto Exchange-

About

Coinbase has long been one of the chief crypto exchanges offered in the United States by which people could buy, sell, and store their preferred cryptocurrencies. The platform is recognized for its user interface, which accommodates ease of use, and the security it extends.

 

Pros & Cons of Coinbase Exchange

Pros	Cons
Easy navigation	Above-average trading costs
Comprehensive protection policies	Few sophisticated trading options
200+ cryptocurrencies offered	Downtime during peak trading hours

 

Upbit Crypto Exchanges-

Upbit facilitates trading in a variety of cryptocurrency assets. Strong security and regulatory compliance are two of Upbit's well-known attributes. It has spread to nations including Thailand, Indonesia, and Singapore.

Pros & Cons of Upbit

Pros	Cons
Active robust security protocols	Insufficient global accessibility outside of Asia
A wide variety of supported coins	Absence of futures or margin trading
Regulatory compliant exchange	Restricted English customer support

 

Selecting a Crypto Exchange  

While selecting a crypto exchange, check-  

• Security protocols  

• Regulatory status  

• KYC process  

• Fee structure  

• Customer support. 

 

For Indian customers, always look for exchanges licensed by the FIU and adhering to the Indian crypto regulatory framework.  

Conclusion

To summarise, the evolution of crypto exchanges reflects the transformation into fully regulated financial institutions and underscores the importance of Crypto KYC in this evolution. Although KYC is seen as an encroachment on privacy, it, in fact, introduces credibility, accountability, and long-term trust into the crypto ecosystem.  

 

Disclaimer: This blog is NOT any buy or sell recommendation and is for information purposes. Crypto investments and trading are highly risky and insecure. Research well or take advice from an eligible financial advisor for investment-related decisions. The author does NOT, through this blog, intend to involve readers in any investment or trading activities. The author has no intention of crypto investment or trading.