Over half of crypto exchanges ignore KYC regulations

CipherTrace discovered the shocking revelation that over 50% of crypto exchanges have either weak or no ID verification at all

The study showed that the majorly affected regions with limited adherence to regulations were Europe and the US. The analytics firms studied over 800 centralized, decentralized and automated market maker exchanges.

The study findings

According to CipherTrace, 56% of the studied cases were not compliant with know-your-customer (KYC) guidelines. The study discovered that the highest number of non-compliant exchanges were in Europe, possibly due to the fact that there are more regulations to flaunt than other territories. In addition, two-thirds of all European virtual asset service providers showed weak KYC practices.

Russia, the UK and the US lead in terms of countries with the highest number of cases with weak KYC adherence. CipherTrace further revealed that the majority of crypto exchanges don’t even care to state their country of origin on their T&Cs.

A staggering 85% of these exchanges have a poor KYC framework, which makes it suspicious that the omission of their origin is intentional. The deliberate omission is to help them avoid complying with AML regulation.

The Seychelles once again hit the headlines for its money laundering notoriety. 70% of crypto firms registered in the island country have poor adherence to KYC guidelines.

Bone of contention on DeFi’s regulation

The question of whether DeFi projects providing financial services should be subject to similar regulations was also raised in the report.

Valerie Szczepanik, the SEC’s Crypto Czar, spoke on the subject at the beginning of the month saying: “These are all financial activities and they are likely subject to various laws already, including securities law, potentially banking and lending laws—definitely AML/CTF laws”.

According to CipherTrace’s Dave Jevans, DeFi protocols would show resistance against compliance to regulations. “From what we have experienced over the last couple of months is that they don’t want to have anything to do with KYC.” He went on to add that they would eventually have no choice but to adhere.