Why_KYC_is_Required_for_Crypto_Exchange_Registration

in #perp • 3 days ago

Many users feel frustrated when they discover that identity verification is mandatory for signing up with a crypto exchange. I shared this sentiment—I was reluctant to share personal details with the platform and particularly wary of facial recognition. After all, isn't cryptocurrency supposed to be untraceable? Why is identity verification required to buy crypto on an exchange? And if I withdraw crypto from a verified account, doesn't that make me traceable?

I've even encountered cases involving ransomware where hackers publicly shared their Bitcoin wallets to evade tracking.

This raises questions: If I complete KYC on an exchange and trade Bitcoin, could my personal information be leaked? I'm required to provide my phone number, ID, and even a Google email. Might the platform sell my identity? These are common concerns among users. We're skeptical about why this data is collected and fear it could be sold after submission. So, what steps can we take?

Why Do Crypto Exchanges Require KYC?

This article explores why crypto platforms enforce identity verification. Do they sell your information after KYC? Let's begin with real-world examples.

HSBC and Standard Chartered incurred billions in fines due to inadequate anti-money laundering (AML) measures. HSBC faced a $1.9 billion penalty after Mexican and Colombian drug cartels laundered money through the bank. They were also accused of serving terrorist groups and allowing North Korea and Iran—both under international sanctions—to open accounts and conduct transactions.

Standard Chartered received a $132 million fine from UK regulators for similar AML failures, enabling criminal groups to launder up to $265 billion.

In traditional finance, AML and KYC are non-negotiable. Banks that neglect AML duties face massive regulatory fines. This is the system: to profit in this sector, you must uphold these responsibilities.

As exchanges bridge the crypto and fiat worlds, they become potential tools for criminal organizations, drug cartels, and money launderers. That's why exchanges must comply with AML laws.

From the platform's perspective, skipping phone verification or KYC could leave them unable to identify criminals if illegal activities occur, risking legal liability and fines. Dirty money from gambling or crime is a contagion—exchanges avoid it entirely. This is why KYC is mandatory for all users.

Will Crypto Exchanges Leak Your Identity?

In short: no, they typically don't leak your data intentionally. Why? Because it would severely damage their business.

Crypto exchanges depend on trust. Without user confidence, trading diminishes. Platforms aim to build long-lasting, reputable brands. Consider this case:

Upbit, South Korea's largest exchange, was investigated for failing to verify 500,000–600,000 accounts, significantly harming public and regulatory trust.

From a business standpoint, exchanges avoid leaking user data, as one incident could ruin their reputation and drive users away. However, other parties might attempt to steal your information.

  1. Mobile carriers can access SMS messages. If you link your phone number to an exchange and they monitor texts, they could identify your platform usage and potentially sell your number.
  2. Free VPNs often contain hidden backdoors. Using one might allow monitoring of all device traffic and sale of your data, including exchanges communications.

Therefore, safeguarding your online security is crucial for crypto users. This explains why top platforms enforce identity verification and pursue compliance.

For example:

  • OKX secured the first license in Dubai and also obtained licensing in Singapore.
  • Binance acquired a license in Dubai.
  • Bitget invested in OSL Group, which holds a Hong Kong license.
  • Bybit received licenses in Dubai and the Netherlands.

These exchanges are advancing toward full compliance. Unlike inexpensive U.S. MSB licenses (costing around $20,000 and easily obtainable), these require rigorous legal compliance and due diligence.

If you're not yet registered with OKX or Binance, now is an excellent opportunity:

1. OKX or Backup Link

  • Asset size: $17.1 billion (slightly increased from 2024, reflecting market growth)
  • Trading pairs: 620 (with 25 new additions, including trending tokens)
  • 24h volume: $16.05 billion (boosted by global user expansion)
  • Highlight: Operated by OKEX Technology Co., OKX received early investment from Tim Draper, the legendary VC behind Hotmail, Baidu, and Tesla. In 2025, OKX remains a top global exchange, especially dominant in Asia.

2. Binance

  • Asset size: $12.85 billion (experiencing steady growth)
  • Trading pairs: 780 (featuring 38 new pairs, aligned with market trends)
  • 24h volume: $19.025 billion (reaching new record highs)
  • Highlight: Founded by CZ (Changpeng Zhao), Binance continues as the dominant crypto exchange in 2025 with over 150 million users. Despite regulatory challenges, its top-tier technology and user experience maintain its lead. Chinese users can register via email and access with a VPN.

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