August 14, 2018

KYC in ICO Process

Legal issues are one of the Top 3 threats that can sink your ICO project. The reason behind this is simple: the legal landscape is changing quickly and you have to adjust your business to these changes. Delivering custom ICOs, we know that pain well enough.

But there’s one singular topic which has kept the same shape for some time already, and comes from the ancient pre-blockchain era. It’s the Know Your Customer process.

What is KYC?

The Know Your Customer process is a way to verify the identity of your investors. It requires the sharing of their data, such as document scans, to make sure they are a real person.

Why do you need KYC in your ICO?

If, among your investors, there are citizens of the United States – a KYC is obligatory under US law. Otherwise, you may have to return their money to them.

Laws in other parts of the world are more liberal, but still, if you consider cooperating with other identities, you need to stay compliant to KYC rules. For example, when you apply for exchange listing it is usually one of their basic criteria.

KYC exists to protect your project against scammers. Even if your project is great and promising, once it has been labeled as a pit for money laundering, you will face serious problems. As practitioners, we strongly recommend incorporating it in your ICO process. Otherwise some opportunities during your project’s growth might stay closed for you.

There’s also an additional benefit in it for you – you can prevent users from creating multiple accounts.

If you are looking for more information on delivering ICO projects, take a look at our most popular comprehensive post on this topic:
>> How To Build An App For Your ICO?

Main problems with KYC in the Cryptosphere

For many people out there, a KYC is a contradiction of blockchains anonymity.

What’s more, it is often perceived as dangerous – you are sending your sensitive data to unregulated and unlicensed companies. If they happen to be scams – you end up not only without the invested money, but you can also get your ID copies sold in the Darknet.

To answer those threats, you can simply use an outsourced KYC vendor of distinguished reputation in order to avoid preparing your own custom solution to verify identities.

Whichever way you choose, if you’re aiming high with your ICO, do use the KYC process to avoid fraud.

August 14, 2018