Long gone are the days where cryptocurrency was relatively unknown and exchange verification was either extremely simple or altogether nonexistent. It used to be simple. Like creating accounts on various other websites, cryptocurrency exchanges were no different. Getting started was simple; all you really needed was an email address. As cryptocurrency has increased in value, however, exchange verification has followed in complexity. Nowadays, you’ll be hard-pressed to find an exchange that allows you to register without providing any verification information, and logging in with just your email address and a catchy password seems to be a distant memory.
Exchanges use different verification procedures to prove you’re human and you are who you say you are. Many of these verification measures are taken to protect you as an investor, while others help exchanges comply with regulations and protect them from being government targets. In the end, several of the same verification procedures that online cryptocurrency exchanges use are seen throughout the internet, and others resemble the type of verification you might provide when opening a bank account.
Not so fast
These days, to open an account on an online cryptocurrency exchange, you’ll likely need to provide some additional information to prove your identity. Exchanges want their user accounts to be linked to real people. Those who are just in it for the money probably wouldn’t care about all this identity verification nonsense if the world’s governments weren’t hovering over their heads and reaching into their pockets. However, exchanges have standard operating procedures that they need to follow in order to continue running without disruption, and this is why we’ll see some exchanges turn away short-term, profitable opportunities in the interest of long-term vitality; a shut down exchange will almost always bring in less money than one that’s following the rules and verifying its investors before they get started.
Address verification in the form of a passport or government-issued identification card might suffice, while other exchanges might require you to get on a webcam, take pictures in a certain manner (maybe holding up a card with a short written statement and your signature) or prove your phone number.
Cut from the same cloth
Most fiat to cryptocurrency exchanges follow a very similar pattern in their account verification process. That means you’ll probably have to go through some level of KYC (know your customer) checks in order to convert cash into cryptocurrency. Typically, you’ll start out with some form of electronic identity verification, where you input your name, address, phone number, and so on. To earn additional account privileges, you may have to verify your account in another manner, and you’ll usually need to provide some documents for human analysis and verification.
On the other hand, cryptocurrency to cryptocurrency exchanges tend to be a little bit more lenient on KYC verification, but these exchanges will be useless to you unless you obtain cryptocurrency in the first place, and the easiest place to do this is on a fiat to cryptocurrency exchange.
Layers of complexity
Exchanges have become creative with their new verification procedures. What used to be as simple as answering security questions has evolved into two-factor authentication (2FA) and now three-factor authentication (3FA). PIN numbers, email verification, fingerprint scans, 2FA codes and other verification puzzles all fall into these categories. While such security measures may increase time needed to log in and seem to be a bit of a nuisance, if you use them right, they’ll be extremely helpful to you as an investor and keep hackers away from your funds.
Buying cryptocurrency without verification
If you’d really prefer not to be tracked and tied to your funds, it is possible to obtain cryptocurrencies, like Bitcoin or Ethereum, without any verification whatsoever. However, this will probably have to be done off-exchange. If you know and trust someone who already has cryptocurrency on them, you could work out a transaction between the two of you that leads them to send cryptocurrency to your wallet. This measure could get your foot in the door and allow you to dodge more intrusive verification measures of fiat to cryptocurrency exchanges, however, you’ll probably come running into a similar problem if you ever want to convert that cryptocurrency back into cash.
At the end of the day, it might just be easier to endure the verification and its consequences: your call.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.