Topic: Anonymity vs. KYC: The Pros and Cons of Cryptocurrency Exchanges - page 4. (Read 847 times)

KYC may be against the spirit and practice of decentralization, but then we can not totally elude the importance of KYC to centralized platforms and cryptocurrency services providers, such as exchanges, first, they need to comply with government regulations for them to be able to get licensed, and since the government already know the risk of allowing crypto transactions on exchange to go unchecked, it's paramount for them to strictly follow the kyc mandate.
-But the user on the other hand has the right to choose between KYC and none KYC and this all balls down to how the individual perceives his privacy.

Even with those verified or regulated platforms cant really be fully trusted 100% but it is way more better compared into those platforms which arent that regulated. Come to think that there are even
platforms as of this moment that arent asking for some verification but still you could be able to make use of their site features if you are really that intending to deal up with crypto space.
Regulation do really come tighter as the years passing by and its not surprising that we do really becomes even more stricter for whatever things that deals up something with money.
You would expect that government would really be always loving to have involvement.

I really do not trust the exchanges without any KYC at all, I mean there are so many laws that bans exchanges to not ask for KYC at all, which means that if we are depositing our money into an exchange that doesn't ask for KYC, that means they are working outside of the law and in that case how could we truly trust them?

However the ones that ask your KYC, even though annoying it might be, working with the officials to make that happen, otherwise why would they need your KYC, not to put your face on their bedroom wall, which means that they are at least a bit more credible, such as if anything happens they may go to jail, just like how FTX screwed up, but didn't get away with it, knowing that prevents scammers a lot.

KYC does good things, but they also pose a lot of harm to those submitting the KYC itself. A lot of data breaches in the past have been recorded inside and outside the cryptocurrency space. It makes up for a perfect recipe for spying people and their activities. You are giving your identity to these entities hoping that you'll get accepted to their platforms and services. What happens when these entities get hacked? Your identity is at risk of getting used by other people in malicious activities. Who gets the repercussions? Of course, no one else but you.

Privacy matters aside, identity verification/KYC can be a very inconvenient process. 

For instance, you can do all the basics DOs and DON'Ts e.g. photo should be clear, text should be readable, etc. and still fail. There should be lots of threads complaining about how they have to try multiple times. There were also cases where people have to wait for days to be approved, worse is if the software can't verify them and they have to be put thru manual verification which is a longer process. This reason alone is enough for me to prefer no-kyc ones since I don't need to be subjected to any of that.

I do like to keep my privacy safe and avoid KYC, but the top exchanges make it mandatory to do your verification. I know there are many ways those exchanges can avoid the mandatory KYC verification, but they won't do it. And if we are to use the best one out there, we have to go by the rules and do it anyway. I don't think that's fair. Data breach has been an issue for a long time now, but as we have to use it anyway, then better to choose the best one out there. Those which got a good reputation, I won't mind sharing my personal info, tho I feel kinda unsecure doing it too. I would be good to have a decentralized exchange (there are many already out there). But they don't seem appealing to me to put my trust in them.

Even though on how much we do hate up CEX and recommend DEX but still there are really lots of ways on why these centralized and regulated platforms had been loved by most many of us, this is why we could

able to trade up directly in between coins with ease due to lots of pairs and could be able to convert it to fiat without any hassle.We do know that we cant directly purchase out a crypto via
these decentralized exchange and this is why we would really be still touching up this area because this is the only way we could acquire coins excluding on that p2p itself.

If you do mind off about anonymity but touched up these CEX's then you would really be needing up to give up that anonymity that you are protecting into.

Mistakes can be prevented with proper practice but we can never prevent a centralized exchanges from controlling us. It's much worse to lose your money because the exchange scams you than you lose it because of a mistake.

This is why decentralized exchanges are still a better choice that the majority must use. It doesn't matter if the exchange is reputable or not, or they will sold your data's or not but once you submit your KYC to them, it automatically kills your privacy. Even a simple sign-up on a centralized exchange will still require our sensitive details such as emails or phone numbers which is not very far from doing a KYC.

If you use a proper DEX like Bisq, then your money is never deposited to a centralized wallet. They never have control over your coins and so there is never any concern about getting your money out safely. This is in stark contrast to any centralized exchange, which takes full and completely ownership of your coins as soon as you deposit, both practically and legally speaking, and can do anything they like with them.

Using Bisq as an example again, there are both mediators and arbitrators who can get involved in the case of any mistakes or disputes. You will find them much more responsive and much more helpful than any centralized exchange's support desk.

QFT.

It is possible to purchase someone else's identity on the dark web for just a few dollars, which includes all the necessary information about that individual. The reason for the low price is due to the abundance of offers and available documents.

One might wonder where these criminals acquire so many documents to sell at such a low cost. The answer lies in the leakage of sites and their respective documents. If these platforms did not require their users to provide documents, then there would be nothing to steal.

Therefore, the KYC actually contributes to fraud, albeit indirectly, and does not provide protection against it.


The list of some known data breaches of companies where users underwent KYC in the past:
As you can see, these are all large and well-known companies that, according to some, can be trusted.

    Uber: In 2016, hackers gained access to the personal information of 57 million Uber riders and drivers, including names, email addresses, and phone numbers. KYC information was not compromised in this breach.

   Equifax: In 2017, hackers gained access to the personal information of 143 million people, including Social Security numbers, birth dates, and addresses. The breach also affected KYC data of some customers, including driver's license numbers.

   Cathay Pacific: In 2018, hackers gained access to the personal information of 9.4 million customers, including passport and identity card numbers. The breach also affected KYC data of some customers.

    Aadhaar: In 2018, an Indian newspaper reported that personal data of more than one billion Indians enrolled in the Aadhaar biometric identity program was compromised, including KYC information such as names, addresses, and bank account details.

    MyHeritage: In 2018, MyHeritage, a genealogy and DNA testing service, suffered a data breach that compromised the email addresses and hashed passwords of 92 million users. The breach also included the KYC data of some users, including names, addresses, and phone numbers.

    Ticketfly: In 2018, the ticket-selling platform Ticketfly suffered a data breach that compromised the personal information of 27 million users, including names, addresses, and phone numbers. The breach also included the KYC data of some users, including driver's license numbers.

    Chegg: In 2018, Chegg, an education technology company, suffered a data breach that compromised the personal information of 40 million users, including names, email addresses, and shipping addresses. The breach also included the KYC data of some users, including Social Security numbers.

    Quest Diagnostics: In 2019, Quest Diagnostics, a clinical laboratory, suffered a data breach that compromised the personal information of 11.9 million patients, including names, dates of birth, and medical information. The breach also included the KYC data of some patients, including financial information and Social Security numbers.

    Truecaller: In 2019, Truecaller, a popular caller identification and spam blocking app, suffered a data breach that compromised the personal information of 47.5 million users, including names, phone numbers, and email addresses. The breach also included the KYC data of some users, including photos of government-issued IDs.

   Telegram: In 2020, a database containing personal information of millions of Telegram users, including KYC data such as passport scans and government-issued IDs, was exposed online. It is unclear how the data was obtained.

    T-Mobile: In 2021, T-Mobile suffered a data breach that compromised the personal information of more than 50 million current, former, and prospective customers, including names, addresses, dates of birth, and Social Security numbers. The breach also included the KYC data of some customers, including driver's license information.

    Cathay United Bank: In 2021, Cathay United Bank, a Taiwanese bank, suffered a data breach that compromised the personal information of more than 1 million customers, including names, addresses, and phone numbers. The breach also included the KYC data of some customers, including government-issued IDs and financial information.


Crypto exchanges

    Bitfloor: In 2012, US-based Bitcoin exchange Bitfloor suffered a data breach in which hackers stole approximately 24,000 Bitcoins, worth more than $250,000 at the time. The hackers used the stolen data to create fake identities and take out loans in the names of several Bitfloor customers.

    Mt. Gox: In 2014, Mt. Gox, a Japan-based cryptocurrency exchange, declared bankruptcy after reporting that hackers had stolen approximately 850,000 bitcoins (worth about $450 million at the time) and other user data.

    Bitstamp: In 2015, European Bitcoin exchange Bitstamp suffered a data breach in which hackers stole the personal information of approximately 18,000 customers. The hackers used the stolen data to create fake identities and commit various forms of fraud, including phishing scams and identity theft.

    Bitfinex: In August 2016, Bitfinex, a popular cryptocurrency exchange, reported that hackers had stolen 120,000 bitcoins (worth about $72 million at the time) and other user data, including names, email addresses, and encrypted passwords.

    Bithumb: In June 2017, South Korean exchange Bithumb suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers. The hackers also stole more than $1 million worth of various cryptocurrencies.

   Coincheck: In January 2018, Coincheck, a Japanese cryptocurrency exchange, reported a security breach in which hackers stole over $500 million worth of cryptocurrency, as well as customer data, including names, addresses, and dates of birth.

    Bitflyer: In November 2018, Japanese exchange Bitflyer suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers.

   Cryptopia: In January 2019, Cryptopia, a New Zealand-based cryptocurrency exchange, suffered a security breach in which hackers stole cryptocurrency worth millions of dollars, as well as customer data, including email addresses and encrypted passwords

  Binance: In 2019, a hacker stole the KYC information of an unknown number of customers, including photos of passports and government-issued IDs.

  BitMEX: In 2020, crypto derivatives platform BitMEX was sued by US regulators for various charges, including failing to take appropriate measures to protect customer personal data. The lawsuit alleged that BitMEX's lax security measures resulted in hackers being able to access and steal the personal data of thousands of users, which was subsequently used for various crimes, such as phishing and identity theft.

   KuCoin: In September 2020, KuCoin, a Singapore-based cryptocurrency exchange, reported a security breach in which hackers stole over $200 million worth of cryptocurrency, as well as customer data, including email addresses and private keys.

    Celsius Network: In August 2021, crypto lending and borrowing platform Celsius Network suffered a security breach in which hackers stole customer information, including names, email addresses, and phone numbers. No funds were stolen in the breach.

   FTX: In 2022, FTX announced that a hacker had gained unauthorized access to one of their databases and had stolen customer information, including names, email addresses, phone numbers, and physical addresses.


Other
    Ledger: In July 2020, hardware wallet manufacturer Ledger suffered a data breach in which hackers stole customer data, including names, email addresses, and phone numbers. The hackers also published a list of over a million email addresses associated with Ledger products.

    Upbit: In November 2019, South Korean exchange Upbit suffered a security breach in which hackers stole more than $50 million worth of various cryptocurrencies.

    Zaif: In September 2018, Japanese exchange Zaif suffered a hack in which hackers stole more than $60 million worth of various cryptocurrencies.

    ShapeShift: In April 2016, crypto exchange ShapeShift suffered a hack in which hackers stole more than $200,000 worth of various cryptocurrencies.

    GateHub: In June 2019, crypto wallet service GateHub suffered a hack in which hackers stole more than $10 million worth of various cryptocurrencies.

    Bitrue: In June 2019, crypto exchange Bitrue suffered a hack in which hackers stole more than $4 million worth of various cryptocurrencies.

    Livecoin: In December 2020, crypto exchange Livecoin suffered a hack in which hackers took control of the exchange's servers and stole more than $2 million worth of various cryptocurrencies.

    YoBit: In January 2021, Russian exchange YoBit suffered a hack in which hackers stole more than $5 million worth of various cryptocurrencies.

    Liquid: In August 2021, crypto exchange Liquid suffered a hack in which hackers stole more than $94 million worth of various cryptocurrencies.

    Poly Network: In August 2021, decentralized finance (DeFi) platform Poly Network suffered a hack in which hackers stole more than $600 million worth of various cryptocurrencies.

    Cream Finance: In August 2021, DeFi protocol Cream Finance suffered a hack in which hackers stole more than $29 million worth of various cryptocurrencies.


Please note that this is not an exhaustive list, and there may be other data breaches and leaks that have not been made public or widely reported.

I tend to agree with this.

Both of them have a downside whether it's DEX or CEX, if you will entrust your private documents in any exchange make sure about their trust issue.  Many people now are convenient in using CEX because they can able reach out to the team when they have a problem but in DEX, once you have a mistake, it's unrecoverable. 

In a case of anonymity, it's clearly CEX is very dangerous, but I don't see it when it comes to reputable or top exchanges.
It might be an unpopular exchnage has an issue of a data breach not being on top exchange.

well, if you are doing p2p trading to convert your crypto directly to fiat, you will use top exchanges like binance. and binance has kyc requirements. i would rather undergo the binance's kyc requirements rather than trust a third party site where you have no idea if you can ever get your money safely. so in this case, it depends on the person himself about his preferences. sure there are pros and cons in both types of trading platforms, anonymous and with kyc requirements. but you need to weigh the possibility of getting out your funds safely.

Interesting facts you've raised here, it's nothing out of the ordinary but, your presentation is just precise and definitive on the matter. Good thing you have a hang on the issue but, its really no much issue.

Every system has got a downside and this isn't expected to be any much different. Its more of you having to size which is more to you at certain points. Why KYC has been such a troubling thing for most is because, we operate an online platform where the whom we do not know.

That's why it remains an issue of trust before using a platform and the options to KYC is always left with you.

With the birth of decentralized exchanges (DEX) now, it's now very easy to trade without even signing up for some exchanges.
But there are some people who prefer using centralized exchanges and are not comfortable using decentralized exchanges.
About KYC, seems this is becoming normalized for some people, but to be honest, I really find it annoying and am afraid to trust my personal identities for some people, it's invading my private data.

Centralized exchange with mandatory and complete KYC, will be more dangerous. All your data will be owned by them so you no longer have privacy.
There are also exchanges that only apply KYC when making a certain amount of withdrawal so that without KYC it can still be used.
The pros and cons of implementing KYC will always be a concern. Those who are not concerned about privacy will do it, but those who are concerned about their privacy will not do the KYC. using Dex exchange would be better than doing p2p without needing to confirm KYC.

Governments do not like that they do not have information about individuals, the source of their income, how they spend their money, and what is their share of each individual’s income. Therefore, they force the platforms to collect all this information. As for money laundering and others, they are just justifications, albeit logical in narrow limits.

The platforms are also trying to collect information on, commercialize or sell it and some are starting to use non-verification as a tool to get more logins.

So in short, everyone is racing to know the most information about you, and you must be smart to reduce the number of information collected about you.

This is the biggest downside of KYC, having your data leaked and that is beyond of your control and no one know where the data goes but for the security concern, its not that safe.

Some exchanges make KYC as mandatory so many have no choice but to comply though some site are still free from this, but if you want more features from CEX then filling out the KYC is a must.

Regulations were forced by the government on the centralised exchanges depends on where that it origin from and we have our own choice which one we can prefer. As you said KYC has its pros and cons however if you are being a trader you should choose the centralized exchanges since the fees are low there whereas p2p exchanges and decentralized exchanges offers anonymity.

My preferences are less important compared to my requirements. I mean even I prefer to stay away from all KYC things, I am still enforced to clear KYC because my needs are seeming like more important than my preference of protecting my identity. I was trading in bittrex exchange and they suddenly locked my account and when I contacted their support, I was directed to clear KYC. I got no other option except submitting my documents to enable withdrawing my coins.

If I was not into bounty campaigns and if I was not into the need of exchanging altcoins and tokens to BTC then probably I would have stayed complete anonymous by now but after cleared KYC in one exchange then I started get used to it. Still, I use old and reputed exchanges. I am not thinking on future problems as of now.

I have yet to see any convincing evidence that this is the case, and I've definitely looked for it. It is absolutely trivial for a money launderer to buy the identities and documents of hundreds or even thousands of users on the dark web for only a few bucks, and to use their names and information to open fake accounts in order to launder money. KYC does not prevent laundering - all it does is frame innocent users who have had their data stolen. And given that literally every major centralized exchange has had one or more data breaches in the past, if you go around completing KYC, then chances are your documents will be leaked, stolen, or sold eventually.

I am curious as to what you are trying to achieve by using a VPN and disposable email addresses when you are handing over your real name and information anyway.

Bisq, Robosats, AgoraDesk. More here: https://kycnot.me/