The issue of regulatory compliance is one of the biggest concerns for banks. While they have a legitimate interest in keeping their customers safe, they are not able to police cryptocurrency trading as easily as they do traditional financial services. The KYC process involves checking the legitimacy of the customer through a variety of means, including government identification, reliable collateral, and credit references. However, this method only checks the customer, not the transaction, and is not a reliable way to detect counterfeiting. In addition, it is expensive for banks to trace transactions at scale.
Issues
Cryptocurrency has emerged as one of the most important financial instruments since the advent of the Internet, but it has faced some difficulties in its journey from newfangled idea to mainstream currency. Despite being worth more than $360 billion, the crypto market is still relatively small. As a result, banks have had to navigate the "gray areas" where crypto companies operate.
Many banks are wary of taking on crypto transactions, because they risk losing their license and paying enormous fines. Some are even unable to accept cryptocurrency payments altogether, due to the high risk involved. It is also not easy to buy and sell cryptocurrencies without a licensed exchange, and peer-to-peer transactions cannot guarantee payment.
Potential business model
As the crypto industry matures, there are two trends emerging among exchanges: professionalization and strategy optimization. Both trends seek to win over users' trust, but in different ways. One strategy is to act like an established company that understands customers' needs. The other is to add product lines.
Crypto exchanges can make large profits by charging transaction fees and commissions. These fees vary from 1% to 3%. These fees will enable them to stay afloat. They can even offer point solutions to institutional customers.
Regulatory concerns
Despite the rise in popularity of cryptocurrencies, there are still concerns about regulatory oversight of crypto exchanges. Without regulation, the industry is subject to widespread fraud, scams, and market manipulation. As a result, crypto exchanges must face a number of hurdles in operating smoothly. This article discusses some of the major concerns about cryptocurrencies and their regulation.
Firstly, it's essential for crypto exchanges to know who their customers are. This is called Know Your Customer (KYC) programs and is an important component of privacy and trust. As such, these platforms must ensure that their KYC procedures are secure and robust, so that their users' privacy is protected. In addition, crypto exchanges should have robust security measures to keep out bad actors.
