Why Real-Name Verification is Required for Registering Cryptocurrency Exchanges

Many users feel a strong resistance when they find out that they must complete identity verification upon registering at cryptocurrency exchanges. For example, from 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 initially touted anonymity of cryptocurrencies stands in stark contrast to the real-world requirement for real-name identification—why do we need to submit our real identity to purchase digital assets? When we transfer assets out of a real-name exchange, 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 linked 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 lacking anti-money laundering measures, as its Mexico 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 also 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.

Regulatory cases of traditional financial institutions reveal an industry iron law: 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, as this is directly related to their commercial 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 can be seen with South Korea's leading exchange Upbit:

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

Telecommunication operator risk: The phone number linked to the exchange may be monitored by the operator, which could identify the user and resell the data.
VPN security risks: Free VPNs often have backdoor programs that can steal data transmitted by the device (including exchange login information).

As digital asset holders, it is essential to enhance network security awareness. Leading trading platforms continue to invest in compliance: OKX holds licenses in Dubai and Singapore; Binance has obtained an operating license in Dubai; Bitget strengthens compliance by investing in the licensed Hong Kong institution OSL Group; Bybit has acquired regulatory licenses in Dubai and the Netherlands. These substantial license applications (not the purchasable MSB 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 (25 new potential coins added)
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 (38 new hot assets added)
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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