Future of Cryptocurrency and KYC Platforms: For a Trusted Authentication System

Now considered financial institutions, governed by the 5e Anti-Money Laundering Directive 5AMLD and the recent MiCA and TFR regulations, crypto asset platforms have understood that by subjecting themselves to certain restrictions, they can make their industry more attractive and gain more customers in the coming years. Provided you provide a reliable user authentication system that facilitates onboarding and does not compromise the customer experience.

Cryptocurrencies on the rise

Synonymous with freedom, lower costs or quick profits, cryptocurrencies are becoming more and more democratic. 8% of the French have already invested in this digital currency, men under 35 more than half. In the United States, 16% of resident adults [1] who have invested in crypto assets. In fact, since this currency is stable, the governors of Florida and Colorado 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 this digital currency, they remain an exception in France and in the world.

A promising economic sector

This easy access has appealed to cyber criminals. As of 2017, money laundering via cryptocurrencies is estimated to be about $33 billion, an average of $6.6 billion per year [3]. If China has decided to ban Bitcoin and crypto currencies from its territory, Europe, for its part, has decided to opt for regulation. Indeed, even if the cryptocurrency sector remains a business ofearly adopters, it is of real economic importance. According to Chainanalysis, with the sharp rise in world prices in 2021, investors earned nearly $163 billion worth of cryptocurrencies, five times more than in 2020. To promote the growth of this sector, Europe has chosen to fight fraud and provide security to investors. and end users.

Bring security thanks to the commitment of KYC

The conversion of the 5e AMLD, the European directive on the use of the financial system for money laundering or terrorist financing, as well as the recent MiCA and TFR regulations, now apply to cryptocurrency platforms. These are now considered financial institutions, in the same way as banks or credit institutions. They therefore have KYC (Know Your Customer) and customer due diligence obligations, among other things. These obligations are also very strict as they impose a KYC from the first euro paid. In order to operate in France, they must also be registered as digital asset service providers (Psan) with the AMF. Binance, the world’s largest cryptocurrency exchange, complied with this procedure and became the 37the company to gain Psan status and covet Paris as her anchor.

A KYC that shouldn’t compromise the fluidity of the customer experience

Therefore, in order to comply with the regulations, the platform, registered as PSAN, must initiate the KYC step for each operation. This identification step, performed when the customer is on board, must meet the challenges of the Financial Markets Code in the context of entering into a remote business relationship. It will therefore be based on two of the six available vigilance measures. One of the most fashionable and available measures to date, the qualified electronic signature is the one that stands out today as the most secure. It consists of a video recording of the ID and a biometric analysis of the face of the holder of the ID combined with the signature of a document confirming the person’s identity, all from a simple desktop or smartphone. PVID (Remote Identity Verification Service Provider) certified services will also provide answers to the challenges faced by regulators, but no service of this type has yet been certified by ANSSI. Therefore, to maintain their legendary ease of use and smooth customer experience while complying with these KYC requirements, platforms must rely on these restrictive devices while ensuring a verification and authentication process, a secure, simple and fast identity. This KYC procedure must be completed in 3 minutes and is available 24 hours a day, 7 days a week so that the authorities can identify every user behind every account and identify possible fraudsters.

The world of cryptocurrencies was created on the fringe of traditional finance, with a culture of experimentation and a libertarian spirit that broke away from the rules. The security of the platforms desired by the legislator and the protection offered by the KYC obligation should contribute greatly to reassuring investors and end users in our country. According to a very recent study by KPMG for ADAN[4]the base of 8% of French 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 the digital dollar announcement

[2] “Into The Cryptoverse 2022”: Research Conducted By The KuCoin Platform In March 2022

[3] https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-cryptocurrency-money-laundering/

[4] https://home.kpmg/fr/fr/home/insights/2022/02/la-crypto-en-france.html

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