2023-10-02 12:03:18
“Know your customer” is a regulation that requires companies to verify a customer’s identity, suitability and risks. Such procedures fit into the wider scope of anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. Banks, stock exchanges, online businesses, postal and domain providers… Everyone wants to know who you are before you even choose their service. However, who knows whose hands your personal data will end up in. Although every company says they are safe, you never know who they are selling to. Once your account is linked to your personal (and verified) identity, your tracking will be a snap. KYC processes are designed to combat terrorist financing, money laundering and other illicit activities. KYC seems like a laudable initiative, because who doesn’t want to stop terrorists and criminals? The following logic is behind KYC: “If we oblige all financial service providers to identify their users, it will be easier to catch and catch malicious actors”. However, terrorists and criminals don’t exactly line up to be identified. They are much more cunning than that. They may assume false identities or find alternative strategies. It is far from them to get over their wits, they are often several steps ahead of the regulation. KYC can realistically deter a small fraction of malicious offenders, say around 1%. Still, what’s the price? The other 99% have to endure an inconvenient identification process just to use a service. Under the rhetoric of “guaranteeing our security”, governments and institutions make rules that look more like something out of a dystopian novel and gradually take away our right to privacy. You suffer all the way through the process, and in the end they reject you. As an example, consider a city where the mayor installed facial recognition cameras in every corner. A gang of criminals looking to rob the local store arrive in a stolen car, their faces covered by masks. After committing the crime and leaving town, they change vehicles and clothes. So what did we do with high-tech surveillance? They have not been identified or traced. Yet, all law-abiding citizens who just want to drive around town or go shopping have their movements and identities constantly logged. The irony? This invasive tracking affects 99% of them just to catch 1% of the criminals. KYC creates a barrier between many users and businesses. One such obstacle is that the process often requires multiple forms of identification, proof of address, and sometimes even financial records. For people who live in areas with poor registration systems, have unrecognized legal documents or have no bank accounts at all, are homeless or in transit, obtaining these documents is impractical. For those who aren’t tech-savvy or simply don’t have access to it, it’s also a barrier, as KYC processes are mostly online, inadvertently excluding them. Another barrier is for occasional or one-time users who may not want to undergo any sort of verification process for single use. Even for businesses, KYC can be difficult as it can be a significant cost for smaller businesses. Imagine a new, elegant club in town with a strict “members only” sign. You hear the music, you see the lights, and you want to get inside. You walk in, ready to enter, but suddenly there’s a long list of criteria you have to meet. You tick all the boxes, but in the end the club still rejects your membership, without any reason. I just wasn’t hired. Frustrating right? This scenario is true for many providers, including crypto providers. Some exchanges will even freeze and block your assets, claiming that they have made suspicious transactions with your account. And with that, you remain hostage to their arbitrary decision. If you choose to bypass their invasive procedure, however, they may hold your money indefinitely. Your data is for sale on the dark web Another problem with the KYC process is that it is traded on the dark web like a pair of socks. Leaks or cyber-attacks can occur on exchanges, as a result of which even the most sensitive data can be exposed and fall into unauthorized hands. Scary, isn’t it? You can buy 100 documents for as little as $10, and bulk buyers are given a discount, so the identities of innocent users who have undergone KYC procedures are for sale. In short, if you’ve ever gone through a crypto exchange’s KYC/AML process, your privacy is at risk. You probably know that Bitcoin and most cryptocurrencies have a transparent public blockchain, which means that all data is exposed to everyone unencrypted and recorded forever. If you link your own address to your identity through KYC, for example by transferring bitcoins from a KYC exchange, your bitcoins are no longer anonymous, and both your money and you can then be tracked. For example, if you send bitcoins from such an identified address to another KYC address (say to a friend), then anyone with access to the information about the address-identity relationship (exchanges, governments, hackers, etc.) will be able to link this transaction and know know who you have transacted with. In summary, KYC does not protect individuals; rather, it threatens our privacy, freedom, security and integrity. Your data can be sold on the Internet. KYC also creates boundaries between many potential customers and businesses, and helps governments and companies track down innocent users. Criminals use stolen identities from companies that collected them thanks to the very regulations that were supposed to protect them. Criminals always know how to circumvent such regulations. In the end, innocent people will be the losers. KYC-free crypto-alternatives If you don’t want to bother with the procedure and would rather keep your data safe, here are some crypto-exchanges where you can give and buy cryptocurrencies without any problems, without subjecting yourself to a complicated customer identification procedure.
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