Pains and Gains of Crypto
The fact of the matter is that despite the massive rush toward crypto, there are still many roadblocks that hinder the adoption of crypto by businesses and the accessibility of crypto for consumers.
The fact of the matter is that despite the massive rush toward crypto, there are still many roadblocks that hinder the adoption of crypto by businesses and the accessibility of crypto for consumers.
2022 is shaping up to be a definitive year for cryptocurrency with more than 81 million Blockchain.com wallets to date, a slew of Superbowl LVI commercials dedicated to crypto, and new regulatory discussions on the horizon.
What makes the current crypto scene all the more impressive is how it thrives, even amidst some serious roadblocks — roadblocks similar to those faced by financial institutions. Current challenges include slow account opening processes, frequently broken API connections, weak verification protocols, multi-day account funding processes, fraud, and a lack of data privacy and protection. This — along with regulatory needs and expectations on the horizon — undercuts much of the growth and success of crypto wallets.
The fact of the matter is that despite the massive rush toward crypto, there are still many roadblocks that hinder the adoption of crypto by businesses and the accessibility of crypto for consumers.
At the top of these roadblocks is addressing how crypto exchanges verify customer identities and accounts as a core part of Know Your Customer (KYC) and anti-money laundering procedures. In fact, a recent study by Coinfirm showed that 69% of the 216 crypto exchanges do not have complete and transparent KYC procedures in place. And, in 2020, CipherTrace found 56% of the analyzed 800 cryptocurrency exchanges and over-the-counter trading desks followed weak KYC practices. Another report by CipherTrace showed that a third of the top 120 exchanges have weak KYC crypto processes and two-thirds “lack strong KYC policies.”
Strong KYC programs are core must-haves for traditional financial services organizations, but many crypto firms struggle with balancing anonymity and stronger verification processes. Today, many crypto firms may not be able to identify and verify customer information — which is a huge discussion for regulators. In addition, most crypto firms tend to be engineering-led organizations where the knowledge needed to build KYC, AML, and digital verification processes are not as commonplace. And with the increased number of central bank digital currencies (CBDCs) appearing in the market, KYC regulations surrounding crypto are only going to increase.
So how do crypto exchanges build a secure platform based on regulated KYC standards, but also retain the anonymity that many crypto users value?
What we’re likely to see moving forward is more partnerships created between major exchange and wallet providers and those who specialize in digital account verifications.
As the leading open finance provider, MX helps deliver open access to the financial ecosystem through the most reliable and secure APIs. For those crypto exchanges and services issuing debit and credit cards, MX can help address current roadblocks by:
MX data aggregation and data enhancement products help verify accounts within seconds, not days. This means that most of your users can start safely trading on the same day that they download your app.
MX delivers credential-free, tokenized ACH funding that can be pre-validated in seconds for consumers who are funding crypto wallets.
In a world where trillions of transactions take place, crypto also has a need for cleansed data. MX cleanses and enhances credit card transactions and raw financial data to unlock its richness without storing anything on our platform.
With the right financial data, crypto wallets will be able to customize rewards for their customers, which can deepen the relationship and encourage retention.
“When I say third generation or next generation marketing automation, it’s a stack developed for the real-time, omni-channel, socially connected, digitally enabled world. You know when smartphone penetration is 75%, that’s an always-on type capability”
The world of crypto is changing at an unprecedented pace. MX is at the center of this transformation — building trust and strong relationships with financial institutions, creating innovative tools for fintechs, and most importantly, helping consumers better understand and manage their finances.
Contact us to find out how you can help your customers easily connect their crypto accounts by integrating MX into your own applications.