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Why KYC is required for cryptocurrency exchanges

Why KYC is required for cryptocurrency exchanges

Explainers Essentials

20 Mar 2019

AAX is committed to operating a digital asset exchange which provides a safe, trusted, and stable trading venue for users.

Having well-defined KYC (know-your-customer) processes and standards is the first step to effectively screening users.

What is KYC?

Banks, financial institutions, and digital asset exchanges need to know an individual's identity before they onboard someone as a customer. Individuals are required to supply identification documents such as passports, identity cards, and address proof when opening an account. The compliance team will then verify the identity of the applicant based on the requirements of the Red Flag Rules.

Building a trusted community for users

While some argue KYC increases sign-up times, AAX takes a risk-based approach with KYC whilst maintaining user convenience through rapid yet thorough KYC processes.

AAX takes a risk-based approach with KYC. The first defensive layer AAX has in place is to attract the right customers. For example, AAX does not allow citizens or residents of OFAC comprehensively sanctioned countries and citizens or residents of EU and UN sanctioned countries to use our platform.

The second layer involves traditional client due diligence practice to know the real identity of the user. Aside from requiring clients to provide identification documents, the compliance team at AAX will also conduct additional background checks on all clients.

All these measures will be taken to ensure traders on AAX are not from a nefarious background to protect the legitimacy of the platform. After all, no financial institution would want to have any association with criminal behaviour, and establishing credibility and trust with investors and regulators is extremely important to the ongoing success of any financial institution,

With that being said, exchanges that operate without a robust KYC policy are putting themselves and their users at risk of being exploited by criminals carrying out illicit activities such as Terrorism Financing and money laundering.

Safeguarding an investor’s assets

It is common for businesses involved in misconduct to be shut down by regulators or have their assets frozen.

Imagine trading digital assets on an exchange that allows anyone to trade without verifying the identity of users. Such an exchange is a magnet for criminals, and it’s, therefore, no surprise that regulators are keeping a close watch on these platforms and are beginning to issue guidance.

In cases where authorities step in to investigate illicit activities on the exchange, it is possible all users will have a part, or all of their assets frozen This would be a major disruption for any investors and one of the reasons why investors should trade on AAX, an exchange which cares a great deal about KYC.

AAX’s thorough yet user-friendly KYC

AAX’s team of compliance professionals has deployed extensive measures in ensuring a fair and trusted trading venue. AAX clients must go through a thorough KYC process before conducting any digital asset or fiat deposit, withdrawal, or trade.

To register as a user on AAX, a user needs to submit his or her passport or identification documents that confirm their identity as well as address proof issued within 3 months matching the standard KYC process at banks. The AAX compliance team will then verify the information and validated users could begin trading in less than 24 hours after the submission of documents. This is categorized as level 1 verification.

Users who wish to increase the transaction limit of their account will need to go through the Level 2 verification which involves a video call through real-time chat with an AAX compliance officer.

Building a trusted exchange is a core value of AAX

From day one AAX is committed to doing the right thing to protect customers and to ensure there is no opportunity for criminal or malicious behavior on the exchange.

The KYC process developed by our team of highly skilled compliance professionals aligns with our commitment and values to create a fair and trusted exchange. KYC is a job that requires a long-term commitment. We will work relentlessly to improve our KYC processes, adopt best practices in KYC and implement KYC policies in accordance to regulatory guidelines.

To find out more about AAX or to pre-register please visit

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