Why is real-name authentication required to register on cryptocurrency exchanges?

Many users feel a strong aversion when they find out that they must complete identity verification upon registering with cryptocurrency exchanges. For example, based on my own experience, I am unwilling to let trading platforms have access to my personal identity information and even more resistant to facial recognition verification. The anonymity that cryptocurrency initially touted starkly contrasts with the real-name requirements in reality—why do we need to submit our real identity to purchase digital assets? When we transfer assets out of real-name exchanges, the transaction trail will inevitably be tracked. Some ransomware even publicly disclose Bitcoin wallet addresses in an attempt to evade law enforcement tracing.

Does completing KYC verification at exchanges for Bitcoin trading mean that personal information is completely exposed? Is there a risk that sensitive information such as the phone number, ID documents, and Google email bound during the registration process could be leaked by the trading platform? These concerns trouble many users: we question the purpose of the platform collecting identity information and worry about the information being resold for profit. How should users respond to this dilemma?

Why do exchanges enforce KYC verification?#

This article delves into the underlying logic of cryptocurrency trading platforms implementing real-name verification and explores the possibility of identity information leakage. First, we reveal the regulatory logic through typical cases:

HSBC was heavily fined $1.9 billion for failing to implement anti-money laundering measures; its Mexican branch laundered money for Colombian drug cartels and even provided financial services to terrorist organizations and sanctioned countries like Iran and North Korea. Standard Chartered Bank was similarly penalized $132 million by the UK Financial Conduct Authority for anti-money laundering loopholes, resulting in $265 billion of dirty money being laundered through its system.

The regulatory cases of traditional financial institutions reveal an industry iron rule: holding a financial license requires fulfilling anti-money laundering obligations. Cryptocurrency exchanges, as a hub connecting fiat currency and digital assets, also face the risk of laundering criminal funds. If a platform fails to establish an effective AML (anti-money laundering) system, it will face criminal liability. Imagine if an exchange does not enforce strict KYC; when judicial authorities request information on involved accounts, the platform will incur hefty fines due to data deficiencies. Therefore, exchanges are highly vigilant against the inflow of dirty money, making mandatory identity verification a necessary risk control measure.

Is there a risk of identity information leakage?#

Compliant exchanges typically do not actively leak user data, which is directly related to their business interests. The core asset of cryptocurrency exchanges is their credit system, and information leakage would lead to user loss and brand collapse. A typical case is seen with South Korea's leading exchange Upbit:

Upbit was investigated for failing to implement strict KYC for 500,000 to 600,000 accounts, and after the incident was exposed, user trust plummeted. This warns exchanges: actively leaking customer information is tantamount to self-destruction. However, attention must be paid to third-party leakage channels:

Telecom operator risk: The phone number bound to the exchange may be monitored by the operator, allowing them to identify the user and resell the data.
VPN security risks: Free VPNs often have backdoor programs that can steal data transmitted by devices (including exchange login information).

As holders of digital assets, we need to enhance our awareness of network security. Leading trading platforms continue to invest in compliance: OKX holds licenses in Dubai and Singapore; Binance has obtained operational permission in Dubai; Bitget strengthens compliance by investing in the licensed Hong Kong institution OSL Group; Bybit has obtained regulatory licenses in Dubai and the Netherlands. These substantial license applications (not the purchasable MSB-type licenses in the U.S.) indicate that platforms are building compliant operational systems.

If you have not yet registered an account with a mainstream trading platform, it is recommended to prioritize compliant institutions:

1. OKX or Alternative Entry #

Asset Management: $17.1 billion (continuing to expand in 2024)
Trading Variety: 620 trading pairs (added 25 potential coins)
Daily Trading Volume: $16.05 billion (benefiting from global user growth)
Core Advantage: Early investment from Silicon Valley legend Tim Draper, offering diverse services such as spot/contract/DeFi, leading market share in Asia.

2. Binance #

Asset Management: $12.85 billion (maintaining industry leadership)
Trading Variety: 780 trading pairs (added 38 hot assets)
Daily Trading Volume: $19.025 billion (setting a historical high)
Core Advantage: Serving over 150 million users, with a technical architecture and user experience that set industry benchmarks, requires VPN usage.

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