You have decided to buy Bitcoin, but were asked to submit a range of documents proving your identity. What is the reason for such a request? The thing is, any trusted Bitcoin exchange is willing to operate within the legal guidelines. And though Bitcoin regulation is being under development all over the world, all governments are sure they wish to prevent money laundering within Bitcoin network. Thus, although it will definitely be a difficult task to get a legal handle on Bitcoin over the long term, regulators can still have a bit of control when it comes to the entry points and exit points of the Bitcoin ecosystem.
What are KYC and AML?
KYC (Know Your Customer) and AML (Anti Money Laundering) regulations are used to make sure that people are not allowed to move around money in an anonymous manner. These are the same regulations applied to banks and other types of financial institutions, and similar these laws and guidelines also apply to Bitcoin businesses. The main point of these laws is to collect information on customers to make sure that they aren’t moving around large sums of money without any checks or balances. Law enforcement often follows the money when it comes to solving various forms of crime, so these regulations are used to make sure that terrorists, drug dealers, and other types of criminals are not able to fund their activities behind closed doors.
How Do These Regulations Affect Bitcoin?
While these regulations don’t really affect anything at the protocol level, they have definitely had a huge impact on exchanges and other Bitcoin businesses. Whenever you’re going from fiat currency to bitcoins, you’re going to have to hand some information over to the exchange. As
Originally appeared at: http://blog.cex.io/news/kycaml-policy-and-identity-verification-at-cex-io-14576