Strategies for Crypto Firms to Maintain Compliance and Increase User Acceptance During Onboarding Processes
In the dynamic world of cryptocurrencies, ensuring regulatory compliance while maintaining a seamless user experience is a balancing act. Crypto businesses can customise their Know Your Customer (KYC) process by adopting a risk-based approach that strikes a balance between compliance and high user pass rates.
This approach involves categorising users by risk profiles, based on factors such as jurisdiction, transaction behaviour, and identity verification results. Higher-risk users undergo enhanced due diligence with additional documentation and checks, while lower-risk users experience simplified, faster verification to minimise friction.
Key strategies for this approach include:
- Tailoring acceptable documents and data inputs: Based on user risk and jurisdictional requirements, businesses can flexibly accept a variety of government-issued IDs, proof of address, or tax identification numbers.
- Using automated and AI-driven KYC solutions: These solutions streamline document verification, reduce manual errors, and quickly assess risk levels, maintaining efficiency and user experience even with complex compliance needs.
- Implementing continuous and dynamic monitoring: This ongoing due diligence helps detect suspicious patterns early and trigger re-verification or additional checks for flagged users.
- Running ongoing AML and PEP screening: Integrated with KYC databases, this helps evaluate whether users should be onboarded or if additional scrutiny is required, reducing false positives and preventing blocking legitimate users unnecessarily.
- Balancing decentralization and compliance: This might mean combining wallet screening with identity verification applied variably depending on the risk and user type.
Additional checks, such as verifying accredited investor status, may be necessary for certain users in various jurisdictions. Businesses can increase checks only for high-risk customers, such as those with Politically Exposed Person (PEP) status or from high-risk countries of origin.
Assisted image capture reduces drop-offs during the ID scanning process. Crypto businesses should be able to accept IDs and proof of address documents from various countries, taking into account local specifics.
By implementing these strategies, crypto businesses can achieve compliance while maintaining high pass rates and a positive user experience. This approach, when combined with solutions like Reusable KYC that allow business partners to exchange KYC data to eliminate repeat verification for overlapping users, can significantly streamline the KYC process.
Notably, Sumsub works with over 1,000 customers, including crypto companies like Bybit, Paybis, and Xena, demonstrating the effectiveness of this approach in the industry. The challenge for crypto businesses is to find a solution that can adapt to a wide range of requirements while keeping the customer journey easy.
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