The KYC (Know Your Customer) process aims to identify and authenticate the identity of users on a platform. It is often highlighted as a key measure to prevent financial crimes and ensure the integrity of transactions.
KYC, or “Know Your Customer,” is a process used by businesses to confirm the identity of their customers. This usually involves submitting documents, such as ID and proof of address, so that the business can ensure that the customer is who they say they are.
Governments and financial institutions claim that the primary purpose of KYC is to prevent financial crimes such as money laundering and fraud. However, this measure often goes beyond what is necessary, compromising individual privacy and financial freedom in favor of broader, centralized control.
Know Your Customer (KYC):
In practice, KYC allows banks, fintechs and exchanges to closely monitor users of their services, under the guise of offering greater security and ensuring compliance with regulations. However, this control goes beyond “protection”: it strengthens the power of governments and financial institutions by providing access to sensitive personal information, such as identity documents, proof of address and even selfies.
This data, stored on centralized servers, increases the risk of leaks and privacy violations, exposing users to potential abuse. Although governments defend KYC as a measure to meet international compliance standards and prevent the use of platforms for illegal activities, the reality is that this mechanism reinforces centralization and expands control over ordinary citizens.
The Know Your Customer (KYC) process involves a number of steps that help companies confirm the identity of their customers.
It is usually requested during registration on financial platforms, such as banks, exchanges and fintechs.
- Registration and collection of personal information: in the first stage, the customer fills in basic information, such as full name, date of birth, email or telephone number. This initial information serves as the basis for the verification process.
- Submission of documentation: after providing personal data, the customer is asked to send identification documents, such as an ID, CPF, passport or driver's license, as well as recent proof of residence. The idea here is to confirm that the person is really who they say they are.
- Photo ID verification: In many cases, companies will ask for a selfie or a photo of the customer holding their ID. This step prevents the use of fake IDs and helps ensure that the person registering is, in fact, the holder of the documents presented.
- Risk and compliance analysis: After verifying the data, the company performs a risk analysis, where it searches for additional information about the customer in public and private databases. The goal is to identify possible criminal records, history of fraud or any other suspicious activity.
- Approval or rejection of registration: with the information verified, the company decides whether or not to approve the registration. If the company finds something suspicious, the company can deny or limit the customer's access to the service.
This process, although quite intrusive, is justified by financial companies as necessary to comply with regulations and “ensure security”.
Why is KYC important for businesses and governments?
Financial companies, such as banks, fintechs, and exchanges, implement KYC to comply with government regulations and avoid being used as conduits for illicit activities.
For governments, KYC is a powerful tool to:
- Track financial transactions.
- Collect capital gains taxes.
- Monitor and control individuals with significant assets.
And for people, what protections does it offer?
While KYC can provide a layer of security against fraud on centralized platforms, it also raises serious concerns. Requiring sensitive data increases the risks of:
- Leakage of personal information.
- Exposure to abuse of power by governments and corporations.
- Loss of privacy.
Is KYC a threat to Bitcoin?
When it comes to Bitcoin, there are two types of people: those who see it as a financial asset (a means to an end) and those who see Bitcoin as a tool for privacy and financial freedom, allowing the use of one's own money without relying on third parties.
For sovereignty advocates, KYC allows governments to force individuals to declare their assets by monitoring all their financial transactions. In authoritarian regimes, this surveillance can result in arbitrary confiscation, often justified through tax laws.
While governments champion KYC as an essential tool to combat financial crime, studies indicate that the percentage of illicit activities involving Bitcoin is minimal, demonstrating that the true purpose of KYC is not security, but control: identifying who has significant assets and who accumulates capital gains.
KYC is not a threat to Bitcoin, but rather to the privacy and sovereignty of each individual.
Should I buy Bitcoin with or without KYC?
The most important thing is to reflect on what you want to do with Bitcoin in the future: what is your goal and what tools you will use in a favorable scenario, where, for example, you can use Bitcoin for payments, or in a challenging scenario, where abusive tax charges and loss of privacy may occur.
If you buy Bitcoin with the aim of converting it into an asset in the future, you can choose to buy it with KYC, as you will need to prove the source of income, at the time of conversion into fiat or even when putting your name on a high-value asset.
On the other hand, those who want to maintain complete privacy will prefer to buy without KYC. These people avoid purchasing fiat-linked assets, such as cars and real estate, and instead use Bitcoin as a store of value for generational wealth transfer.
KYC represents a trade-off between convenience and privacy. For some, KYC is not that important; for others, it is a mechanism of financial repression.
