Cryptocurrencies are unquestionably among the hottest current dinner-party topics of conversation. They are an investment vehicle offering a new means of trading goods and services. More than that, though, they also represent a way of circumventing the world’s dominant financial institutions.

It is the latter aspect of cryptocurrencies that worries many people, organisations and nations. The technology has a somewhat mysterious image, with the matter of anonymity causing particular concern.

Consequently, many have predicted that the increasing creep of ‘know your customer’ (KYC) and anti-money laundering (AML) regulations could ‘kill’ the current cryptocurrency craze sweeping the planet. But is this situation truly inevitable?

Have cryptocurrencies been mischaracterised?

Rightly or wrongly, many have long perceived cryptocurrencies as suspiciously secretive. Governmental factions around the world have opposed them, most notably China, which moved earlier this year to completely ban their use.

It is a fear of losing control that undoubtedly drives much of this opposition. Cryptocurrencies are decentralised, working independently from central banks, which – in theory – also protects them from political interference.

Regulators can easily monitor transactions involving regular currencies, thanks to third-party interactions. This enables them to identify and intervene in fraudulent activities, corruption, money laundering and terrorist financing. If banks facilitate illegal transactions, they may pay penalties for this running into the hundreds of millions.

By comparison, many have expressed security concerns about cryptocurrencies on the grounds that they are anonymous. However, this isn’t quite true. Blockchain addresses are pseudonymous, and it is straightforward to track the movement of assets between addresses.

There is another way forward

Much reason exists to believe that cryptocurrencies and KYC measures can co-exist. Indeed, they may even be able to synergise with each other transparently and traceably, so that they comply with all fiscal rules needed for today’s world.

While cryptocurrencies remain mysterious from a KYC standpoint and are subject to little regulation, they are realistically here to stay. This means that they realistically can, and will, be regulated. Nonetheless, it is up to the financial industry to devise ways of monitoring and controlling cryptocurrency systems’ behaviours and transactions.

Cryptocurrencies already provide various regulatory advantages, with their accessible, trusted and verifiable audit trails making it extremely hard to hide illegal transactions. So if anything, KYC and AML regulations may not sound the death knell for cryptocurrencies, but instead make them greatly beneficial for a wide range of industries.

For the right software that provides the complete trustworthy KYC check every time, choose SmilePass. Talk to us about how we can help you to ensure compliance and enhance the customer experience.