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Author: Admin | 2025-04-28
Base. This larger market reduces the risk of market manipulation. Smaller exchanges may see more price manipulation due to a smaller order book and lower average trading volumes. Whales or bad actors can more easily manipulate pricing in less active markets.Concerns Regarding KYC in CryptoWe detailed some advantages of KYC compliance. However, not everyone in the crypto market is a fan of these requirements. From a consumer perspective, privacy concerns and verification inefficiencies become leading gripes. Exchanges also now face additional costs. Let’s look at the common criticisms of KYC.Privacy ConsiderationsIn the 2008 Bitcoin Whitepaper, Bitcoin’s anonymous founder described it as a peer-to-peer electronic cash system. KYC was not mentioned in the whitepaper for Bitcoin or Ethereum, the second-largest cryptocurrency by market cap.Cryptocurrencies were initially developed as an alternative to traditional currencies and as utility tokens that allowed uncensored access. KYC requirements enforced by most exchanges prevent equal access and allow censorship.The secure storage of sensitive data is also an important consideration. In 2024, a breach of National Public Data led to the release of sensitive data for billions of people worldwide. Any entity that stores identification information or other sensitive data, such as social security numbers, can be a target for bad actors.Lengthy Verification ProcessKYC verification has come a long way, with many exchanges completing the process in minutes. However, in some cases, verification can take hours or even days. Coinbase advises new users that ID verification can take up to 48 hours.These delays can frustrate new users eager to start trading cryptocurrencies. They may also affect open trades. One vocal Coinbase customer took to X to voice a complaint after Coinbase allegedly froze the open trades due to missing KYC information. Crypto markets can change rapidly. According to the post, the delays led to a loss of nearly six figures because the positions couldn’t be closed.Additional Compliance CostsThe costs involved in KYC compliance and ongoing monitoring can get expensive for crypto exchanges and brokerages. As a publicly traded company, Coinbase provides financial statements in its 10-Q. While Coinbase’s 10-Q reports don’t specify KYC costs, the company’s P&L details indicate slim profits in many quarters and occasional losses. KYC adds to operating costs.Like all businesses, these costs must be recouped in other areas. To maintain profits, one of two things must happen: cost-cutting in other areas or revenue increases. For most exchanges, trading fees drive revenue. KYC requirements often
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