- Binance is set to lose its customer base to KYC-compliant crypto exchanges in the upcoming months.
- ByBit and Kraken have started the user verification process to take advantage of non-transparent Binance.
- The US Securities Exchange Commission may regulate crypto exchanges over money laundering and online frauds.
Binance, the world’s largest digital currency trading platform, presently adds traders on its platform without verifying their identity. This approach is often welcomed by users who do not wish to share their bank or government-verified identity proof details on online platforms.
But as financial regulators clamp down on crypto platforms, it remains a question as to how long Binance can evade the regulatory directives.
Many other crypto exchanges have already started complying with the Know Your Customer (KYC) guidelines in Canada, the UK, and other regulated jurisdictions.
While Binance asks for customer identification in case of high-value trades, it does not seek KYC for regular transactions. As it continues to violate the directives this way, it may incur high losses going forward as regulators start cracking down on non-regulatory crypto operations.
Impact of anonymous crypto trading on Binance
So far, Binance has stopped its operations in Ontario and has been banned in the UK. These two developments have already cost the crypto exchange billions over non-compliance operations.
Bybit, also a crypto exchange, was banned by the Ontario Securities Commission in late June on the charges of not adhering to trading regulations in the Canadian province. Consequently, the British crypto exchange has made KYC a mandatory practice for all its existing and new customers starting July 12.
While a section of crypto investors prefer anonymous trading, others are in favor of the KYC practice in the hopes that it will lessen fraudulent transactions.
For such traders, Bybit may get a share of Binance’s users because of its proactive KYC guideline compliance.
Copyright © 2020 Kalkine Media
Will Binance implement KYC in 2021?
Binance may have to comply with KYC regulations at some point, especially if the US Securities and Exchange Commission (SEC) agrees with Senator Elizabeth Warre’s stance on regulating crypto exchanges in line with securities ones.
SEC Gary Gensler is expected to reply to the Democrats senator’s letter by July 28, but it is not an obligation for the regulator to take immediate action against crypto exchanges.
Crypto-based money laundering, illegal transaction and crypto mining's impact on the climate are few of the many issues mentioned in Ms Warren’s letter to SEC. She has also pointed that anonymous traders on crypto platforms could be looking for fraudulent transactions, which makes regulation important.
The issue of possible criminal transaction may force Binance to comply with KYC guidelines, as it could be the only option for Binance to sustain amid stringent regulations.
At the same time, Binance may also not like to lose its clients to emerging crypto trading applications like Kraken, which is also seeking user verification process for transparency and security reasons.
The above constitutes a preliminary view and any interest in stocks and cryptocurrencies should be evaluated further from investment point of view.