The future of cryptocurrencies and KYC platforms: for a reliable authentication system

Now considered as financial institutions, governed by the 5th the anti-money laundering directive 5AMLD and the latest MiCA and TFR rules, cryptoactive platforms have understood that subjecting certain restrictions will allow them to make their sector more attractive and gain more customers in the coming years. Provided that we offer a reliable user authentication system that facilitates onboarding and does not penalize the customer experience.

Cryptocurrencies that are on the rise

Synonymous with freedom, reduced fees or quick gains, cryptocurrencies are constantly becoming more democratic. 8% of French people have already invested in these digital currencies, men under the age of 35 in more than half of them. In the United States, it is 16% of resident adults [1] who have invested in cryptocurrencies. Considering this currency as stable, the governors of Florida and Colorado have even recently stated that they want bitcoin to be quickly accepted for tax payments. But Germany is leading the race, with 37% already investing in cryptocurrencies [2]. If many sites like Microsoft, Rakuten, Amazon, Expedia, PayPal, NordVPN or fast food chains like Starbucks or KFC accept these digital currencies, they will remain an exception in France and in the world.

A promising economic sector

This easy access has appealed to cybercriminals. As of 2017, money laundering via cryptocurrencies is estimated at around $ 33 billion, an average of $ 6.6 billion per year [3]. If China has decided to ban Bitcoin and cryptocurrencies from its territory, Europe, for its part, has decided to opt for regulation. In fact, although the cryptocurrency sector remains a business ofearly adopters, it is of real economic interest. According to Chainanalysis, with the rise in world prices, investors earned nearly $ 163 billion on cryptocurrencies in 2021, five times more than in 2020. To boost growth in this sector, Europe has chosen to fight fraud and provide security to investors and end users.

Bring security thanks to KYC’s commitment

The implementation of 5th The AMLD, the European directive on the use of the financial system for money laundering or terrorist financing, as well as the latest MiCA and TFR rules, now apply to cryptocurrency platforms. These are now considered financial institutions in the same way as banks or credit institutions. They therefore have, among other things, KYC (Know Your Customer) and customer knowledge obligations. These obligations are also very strict as they impose a KYC from the first euro paid. To operate in France, they must also be registered as digital asset providers (Psan) with AMF. Binance, the world’s largest cryptocurrency exchange, followed this procedure and became the company to achieve Psan status and covet Paris as its anchor.

A KYC that should not penalize the fluid customer experience

Therefore, in order to comply with the rules, the platform registered as PSAN must start the KYC step for any operation. This identification step, performed when the customer is on board, must meet the challenges of the Financial Markets Code in connection with the conclusion of a distance business relationship. It will therefore be based on two vigilance measures among the six available. Among the most fashionable and accessible measures to date, the qualified electronic signature is the one that today stands out as being the most secure. It consists of a video recording of the identity document and a biometric analysis of the face of the holder of the identity document combined with the signature of a document certifying the person’s identity, ranging from a simple desktop or smartphone. PVID-certified services (Remote Identity Verification Service Provider) will also provide answers to the regulators’ challenges, but no service of this type has yet been certified by ANSSI. Therefore, in order to maintain their legendary usability and smooth customer experience while complying with these KYC requirements, platforms must rely on these restrictive devices, while guaranteeing a verification and authentication process, secure, simple and fast identity. This KYC procedure must be completed in 3 minutes, available 24 hours a day, 7 days a week. The authorities will thus be able to identify each user behind each account and identify possible fraudsters.

The world of cryptocurrencies was created on the edge of traditional finance, with an experimental culture and a libertarian spirit that broke free from the rules. The security of the platforms that the legislator wants and the protection that the KYC obligation provides should greatly help to reassure investors and end users in our country. According to a very recent KPMG study for ADAN[4]the base for 8% of French people who have invested in 2021 could rise to 12 or 13% by the end of 2022.

[1] Figures released by the US Government on March 9, 2022 at the time of publication of the digital dollar

[2] “Into The Cryptoverse 2022”: Survey conducted by the KuCoin platform in March 2022



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