Why is KYC Required for Crypto Exchange Registration

in #okxtrade • 2 months ago

It's common for users to feel frustrated when they discover that identity verification is mandatory during sign-up for a crypto exchange. I experienced this too—I didn't want the platform accessing my personal details, and I was especially resistant to facial recognition. Isn't cryptocurrency meant to be untraceable? Why should I verify my identity just to buy crypto? And if I withdraw from a verified account, doesn't that make me traceable?

I've even encountered ransomware cases where hackers shared their BTC wallets to avoid detection.

This raises questions: If I complete KYC on an exchange and trade Bitcoin, is my personal information exposed? I have to provide my phone number, ID, and a Google email. Could the platform sell my identity? These are widespread concerns. We're skeptical about why they collect this data and fear it might be sold after they gather it. So, what alternatives do we have?

Why Do Crypto Exchanges Require KYC?

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

HSBC and Standard Chartered faced multi-billion dollar fines for weak anti-money laundering (AML) controls. HSBC was penalized $1.9 billion after Mexican and Colombian drug cartels laundered money through it, with allegations of serving terrorist groups and enabling transactions for sanctioned nations like North Korea and Iran.

Standard Chartered incurred a $132 million fine from UK regulators for inadequate AML procedures, allowing criminal groups to launder up to $265 billion.

In traditional finance, AML and KYC are non-negotiable. Running a bank without proper AML invites massive regulatory fines—it's a core responsibility for operating in this space.

As exchanges connect crypto and fiat systems, criminal organizations, drug cartels, and money launderers could exploit them. This compels exchanges to comply with AML laws.

From the platform's perspective, skipping phone verification or KYC could leave them unable to identify criminals during illegal activities, leading to legal liability and penalties. Dirty money from crime or gambling is toxic—exchanges avoid it at all costs, which is why they mandate KYC for every user.

Will Crypto Exchanges Leak Your Identity?

In short, exchanges typically don't leak your data intentionally because it would severely damage their business.

Crypto exchanges rely on trust; without it, users won't trade. These platforms aim to build lasting, reputable brands. Consider this case:

Upbit, South Korea's largest exchange, faced investigations for not verifying 500,000–600,000 accounts, eroding public and regulatory trust.

From a business angle, no exchange wants to leak user data—one incident could destroy their reputation and drive users away. However, other parties might steal your info:

  • Your mobile carrier could access SMS messages. If you link your number to an exchange and they monitor texts, they might identify your platform usage and potentially sell your number.
  • Free VPNs often have hidden backdoors. Using one could allow monitoring of all device traffic and data sales, including exchange interactions.

As a crypto user, safeguarding your online security is essential. This explains why leading platforms enforce identity verification and pursue compliance, such as:

  • OKX securing the first license in Dubai and another in Singapore.
  • Binance obtaining a license in Dubai.
  • Bitget investing in OSL Group, which holds a Hong Kong license.
  • Bybit gaining licenses in Dubai and the Netherlands.

These exchanges are moving toward full compliance, unlike easily acquired U.S. MSB licenses (costing about $20,000), which require genuine legal adherence and due diligence.

If you haven't registered for OKX or Binance yet, now's an ideal time:

1. OKX or Backup Link

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

2. Binance

  • Asset size: $12.85 billion (showing steady growth)
  • Trading pairs: 780 (with 38 new pairs aligned with market trends)
  • 24h volume: $19.025 billion (achieving new record highs)
  • Highlight: Founded by CZ (Changpeng Zhao), Binance continues as the leading crypto exchange in 2025, with over 150 million users. Despite regulatory hurdles, its superior technology and user experience maintain its edge. Chinese users can register via email and access using a VPN.

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