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Most crypto exchanges have weak protection against money laundering
More than 80% of decentralized exchanges do not have a user verification process at all
Russia is among the five countries where crypto exchanges have weak verification
The BitMEX scandal is likely to hit the DeFi market too
Weak client verification standards contribute to money laundering, says analyst firm CipherTrace
More than half of crypto trading platforms do not have a sufficient level of customer verification. This is the conclusion reached by the analytical blockchain company CipherTrace in its report on geographic risks for 2020..
According to a published study, over 55% of global cryptocurrency trading platforms have weak client verification processes. The sample used more than 800 trading platforms in more than 80 countries.
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Due to the insufficient level of customer verification, attackers can deposit or withdraw any amount on a daily basis, the company notes:
“Typically, creating accounts on these exchanges required only an email address, name, and possibly a phone number,” CipherTrace said..
Europe is the leader in the largest number of crypto sites with imperfect Know Your Customer (KYC) procedures. Poland and Norway are in first place. The top five also include the USA, Great Britain and Russia.
The threat of decentralization
Separately, CipherTrace notes the threat from the decentralized finance market (DeFi) Decentralized finance (DeFi) – this is financial services, technology-based blockchain that offer users access to open, effective and … More). Over 90% of DEXs had imperfect KYC methods, and over 80% did not have KYC at all. CipherTrace CEO Dave Jevans predicts an imminent tightening regulation of the cryptocurrency market regardless of the readiness of crypto sites:
“Anti-money laundering and accounting rules will be enacted soon, whether exchanges and other financial institutions are ready or not.”.
Jevans’ comment comes amid a loud scandal around the BitMEX cryptocurrency exchange, which was convicted of running an unregistered trading platform and lacking the necessary measures to counter money laundering..
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Former head of strategic development and business growth at DuckDuckGo, Adam Cochran, believes that the BitMEX curiosity will affect not only centralized sites, but also the DeFi market as a whole, despite its decentralized nature:
“In particular, the Ministry of Justice persecuted people on sites such as localbitcoins.com and paxful.com for participating in money laundering or failing to comply with preventive measures.”.
Despite the fact that regulators are unlikely to be able to close unwanted smart contracts, it will not be difficult for them to reach the developers themselves with access keys or programmers who help create architectures for decentralized products..
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