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Regulators across the world have put pressure on crypto exchanges to adopt know your customer (KYC) protocols for wallet holders on these exchanges.
Banks and other financial institutions use these protocols in the fight against money laundering and other financial crime.
IDEX, an Ethereum based crypto exchange, has put KYC protocols in place after the completion of last week’s trades. The exchange will now require KYC verification for new accounts before one is permitted to trade cryptocurrencies.
In 2018, the exchange announced that they were considering adopting KYC protocols and this was met with criticism from privacy-centric crypto traders. These traders believe that KYC information will be used to pry into the private details of exchange users.
Possible effects of KYC
Adoptions KYC protocols create a number of possible scenarios for an exchange. For starters, KYC information makes a trading platform more secure as the information about individuals trading on it can be used to keep track of each transaction’s origin and destination.
This security may attract more clients to the platform as they can be more confident that their holdings are in safe hands.
One the other hand, privacy-centric crypto holders are likely to turn away from exchanges that employ KYC protocols.
Many crypto enthusiasts engage with digital assets because they want to reap the benefits of the privacy that comes with crypto trading.
Taking away this privacy on an exchange defeats the purpose for which they have initially gotten into crypto trading and hence, they may move their holdings to exchanges that do not have KYC protocols.
Crypto trading accounts created on IDEX
IDEX is one of the popular Ethereum exchanges, and its continued growth may place it well on its way to become one of the top ten crypto exchanges in the world.
Before the deadline for the adoption of KYC was reached, over twelve thousand accounts were opened on IDEX. After the deadline, an additional three thousand were opened. This shows that IDEX is growing in popularity as more traders are joining the exchange.
Walking the line between centralized and decentralized
The Ethereum based exchange has properties of both a centralized and decentralized exchange. While users can manage their crypto holdings on the Ethereum blockchain, they can also execute trades off-chain as the exchange seeks to stop slippage.
The availability of the off-chain feature on IDEX places it at an advantage when compared to other centralized exchanges. During the recent crypto winter, IDEX experienced an increase in trade volumes when several other centralized exchanges were experiencing a sharp decline.
IDEX CEO, Alex Wearn, said that the exchange’s going against the grain was a result of traders and investors moving onto the open-source trading platform in a bid to avoid the effects of crypto winter.