There has been no shortage of stories that have made headlines in recent years about users getting locked out of crypto wallets and losing millions of dollars worth of digital currency due to passwords. lost passes. In San Francisco, a man has $240 million locked away in a Bitcoin wallet to which he forgot the password, and in two more unsuccessful guesses, it will be locked forever.
Cryptocurrencies have become a frenetic frontier of speculation and investment, with the market reaching a peak capitalization of $3 billion in November 2021. Whatever your opinion of crypto, it doesn’t look like it’s going away any time soon.
While some store their cryptocurrency in “cold wallets”, like our man from San Francisco, most buyers or sellers of cryptocurrency today – whether for fiat currency or other crypto – create an account with exchanges, such as Binance and Crypto.com. Some users also choose to store their assets on these exchanges for longer periods of time.
But with this financial responsibility comes increasing legal oversight and regulation, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. In some jurisdictions, exchanges are covered by AML regulations, such as AML6 in Europe, while in others the laws surrounding digital assets are still being consolidated. Earlier this month, President Joe Biden has signed an executive order on cryptocurrenciescalling on the government to examine the risks and benefits of cryptocurrencies, with consumer protection being one of six key areas.
With greater consumer adoption, we will likely soon see a level of regulation comparable to that of the traditional financial services industry. These requirements, however, are at odds with the weak KYC and AML processes in place today at most cryptocurrency exchanges.
As cryptocurrency enters its “teens,” how can these exchanges ensure genuine users have simple, secure, and controlled access to their digital assets?
What are cryptocurrency exchanges and why is verification important?
Cryptocurrency exchanges act as a bridge between traditional fiat currencies and cryptocurrencies, allowing users to create an account so they can buy and sell crypto.
Many users ultimately choose to store their cryptocurrency on exchanges, so they don’t get locked into their funds. Typically, if users forget their password, the exchange can usually help them verify their identity and restore access to the account (unlike cold wallets).
Despite this financial responsibility, more than two-thirds of the top 120 cryptocurrency exchanges have weak KYC checks.
Cryptocurrency exchanges need to keep untrusted people out, while making identity verification quick and easy for legitimate customers. This is especially important in an expanding and competitive market: potential customers appreciate effortless integration and authentication.
Traditional financial institutions devote significant resources to KYC and AML compliance as they are regulated entities and otherwise risk fines and penalties. Cryptocurrency exchanges need to follow suit.
So how can cryptocurrency exchanges improve their verification processes?
Biometric facial verification is a compelling way for exchanges to ensure strong identity verification from the start, completing the most crucial step in anti-money laundering and KYC requirements. Because biometric face verification can verify users against a trusted document, such as a passport or driver’s license, it can ensure exchanges have the highest level of verification. Unlike other authentication methods, such as passwords or SMS OTP, biometrics is a “non-shareable identifier”, which means that it simply cannot be stolen, hacked or compromised in the same way. way.
The most advanced liveness checking solutions even have protections against new digital threats like deepfakes, and can help verify that exchanges are dealing with the right person, the real person, and right now – not a photo or a mask, bot or bad actor, or video replay or image.
For the user, nothing could be simpler either. The leading facial verification solutions use passive authentication principles, which means that they do not require any additional effort from the user. No complex instructions to read, understand and perform means it’s easy but also inclusive. As the crypto space becomes increasingly consumer-facing and competitive, offering a seamless onboarding solution like this is invaluable for quickly onboarding new customers without compromising security.
Biometric Use Cases for Cryptocurrency Exchanges
There are three main security features that biometric facial verification can facilitate for crypto exchanges:
- Integration: Accurately verify asserted identity against a photo of a trusted ID document, perform liveness checks and create a biometric profile – link the face to the document and verify the new user.
- Continuous authentication: Using the biometric template provided during onboarding, you can re-login users securely and effortlessly with a brief facial scan. This helps prevent abandonment by genuine users, as well as preventing fraudulent account takeovers.
- Identity recovery: If a user loses their device, breaks it, or gets it stolen, they lose the ability to authenticate. As such, cloud-based facial verification solutions are best practices, as they can allow users to securely access their account through any other device without the need to re-register.
Next-gen verification, suitable for next-gen currency
Crypto is one of the most advanced and technically savvy industries. It seems contradictory to wait for regulations to implement equally advanced security measures. Biometric face verification provides both the level of security and effortless user experience needed in the industry.
Implementing best practice verification technology is essential for cryptocurrency exchanges to protect the future and show consumers (and the competition!) that you are serious about security.
About the Author: Aarti Samani is SVP Product and Marketing at iProov an award-winning authentication technology solutions provider that manages the verification of over 100 million people every year. The company’s authentic presence assurance is used by governments, banks and other organizations worldwide.