5 Advantages | How is an ICO KYC beneficial in the Long Run

Whenever a business examines the initial days of the ICO, it will notice an upsurge in suspicious activities. For example, scams, hacking, and financial terrorism. Any new business that accepted tokens established its own compliance and regulations instead of following the established laws and principles. All of such factors, and the standards have influenced the ICO platform. In this way, KYC crypto and AML compliance standard processes were introduced. The above processes helped in protecting the data of the clients.

What Is KYC And How Is It Advantageous?

KYC means ‘know your customer’. It is the process by which organizations and firms acquire the personally identifying information of the client. For example, full name, and address. It is a way to know the identity of the client being onboarded and if any investor wants to invest in the business, the company will know the relevant details about the candidate. It is commonly seen that when an ICO is launched in the market, the owners present currency to the interested buyers for purchase. For this purpose, there are two types of tokens: security and utility.

When there is more publicity about the projects, it results in an increase in the value of the tokens. In this case, when the value of tokens is converted into fiat money, it will be massive. If firms evaluate the time before KYC/AML systems, there was a huge amount of money that was transferred through blockchain networks. A technique that investors employed was that they transferred the money so much that it became extremely difficult to keep track of the money. Hence, the main purpose behind KYC/ AML systems was to discourage the onboarding of customers with illegal purposes and having criminal histories.

What are the Different Types Of Tokens?

  • Utility Tokens: They are like an online voucher and benefit the investor by winning the rights to their project’s goods. The benefit/ upside of the token is that it can be traded in the cryptocurrency trading market but the downside is that nobody can take the rights and move to other trades.
  • Security Tokens: Unlike utility tokens, security tokens have tradable value. This kind of token can be used instead of a password (that unlocks an asset). It can also be understood as an electronic key. There are different types of security tokens: OTPs, disconnected ones, contactless, SSOs, and programmable ones.

What Vulnerability is Present In The Tokens?

Just like anything else, there are pros and cons to the tokens. A huge disadvantage of the tokens is that they can be stolen and used for destructive purposes. For instance, if a customer lost their token while traveling, any unauthorized user can use the information on the token and damage the digital property of the client.

What Are The Five Major Conveniences That Come With ICO KYC?

  • More credibility and legitimacy: If the initial coin offering (ICO) has explicit details, it will make the process easier for both parties involved (the organization and the investor). It increases credibility manifold.
  • When the ICO projects are in agreement with KYC regulations, the investors will have a way to distinguish between real and fake projects.
  • KYC crypto compliance with consent facilitates ICOs to reach more audiences and widen their reach. It is a strategy that helps reach prospective investors all over the world.
  • In crypto transactions, it is easy to highlight KYC-compliant tokens.
  • The ICO distribution becomes more manageable.

How Can Organizations Make Their ICO According To KYC Regulations?

For this purpose, the organization should acquire evidence that authenticates its identity and also certifies the details given in the submitted documents. The proof can include residential evidence as well as an ID card. The requirement of the proof also depends upon the department where it will be submitted. The information collected can be difficult if there are a number of investors involved in the project. In such cases, the feasible solution is to establish your ICO digital platform according to KYC compliance.

The process is so much easier because the investor only needs to upload the documents and let the system cross-check the information. As always, there are two types of verification systems: one is AI-based and the other is manual. The first system is quick, more productive, and energy-efficient for the user and businesses.

Final Remarks

Aligning ICO with KYC process regulations is a great way to discourage fraud, reduce financial terrorism and safeguard the property of the investors. It also means that there will be lesser legal and credibility problems that will result in a trusted relationship with the financial institution (bank). Any funds and tokens collected through ICO can attract illegal money. But KYC and AML regulations have the potential to win clients’ trust in the blockchain economy. The crypto transaction regulations also help ensure that ICOs are real and genuine. Hence, this kind of token economy will help the public.

Nicole Luke

I am Nicole a creative content writer living in New Jersey. I have been working in the field of Content Writing for many years