The crypto bubble is still inflated, but user adoption has not followed in suit. Apart from a few other factors such as the absence of education, security threats, etc., another major contributor to holding back the growth is bulky and often over-compliant Know-Your-Customer (KYC) procedures.
It is a major hurdle for AI trading platforms, such as BTC Definity, where the traders would need to go through KYC processes. While maintaining data security is vital, it is equally important to ensure it becomes frustrating for traders.
The Friction of KYC
Assume there is a person (you) who wants to get started in the crypto market. You’re trying to invest $20 in some Ethereum, but you have to go through an ID check with a photo ID and recruitment to provide video selfies taken by yourself. Frustrated, you will walk away. This happens all too often.
Why KYC Backfires
The biggest pain point is KYC as users can be bombarded with unnecessary burdens. Even small transactions can be subject to it on many exchanges, which raises the barrier of entry. KYC is a system that has been essential within businesses for many years but creates more legitimate discomfort than every other technique.
Most require it for even relatively small transactions, making their platform mostly inaccessible to new traders. However, fraudsters find themselves an easier way out – they purchase verified accounts on the dark web. As a result, it makes this an ineffective way to keep the traders safe even with KYC compliance.
Nevertheless, AI-powered fraud detection makes it possible to analyze transactions in milliseconds, approving legitimate purchases and identifying fraudulent behavior.
How AI Can Help with Crypto Trading and KYC Compliance
Leveraging AI for crypto trading by users and KYC compliance by AI trading platforms can be of great advantage to both. It can help catch any transaction for fraudulent activities in real-time, providing access to innocent players while stopping cyber-criminals.
The Path Forward
KYC should be streamlined and exchanges ought to comply with the KYC laws but not necessarily go for a thorough verification in case of low-value transactions.
Behavioral-based AI, which can give a timely and smooth use involvement with quicker endorsements for tricks. AI can also be useful in fraud prevention with behavioral-based fraud detection.
Unlocking Crypto’s Potential
The decisions to make now are fuelled by striking the right balance between security, ease of use, and scaling for mass adoption that will allow the crypto market to realize its complete potential. AI-enabled onboarding journey in the FinTech sector can bring a new dimension of adoption and innovation across the ecosystem.