Will Countering AML and KYC Concerns Bring Crypto and Banking Sector Together?Bank.pro Sales Team
The traditional banking system was moved with the introduction of cryptocurrency in the market, which posed a threat to the current system and its legitimacy. People quickly started consuming the digital form of currency, moving from the traditional banking system. Amidst the transition, the banking system needed to involve itself with the cryptocurrency industry.
One of the most moving factors in the crypto market was the concept of decentralization that attracted the global community. Since banking procedures involved a central mediatory party, it restricted a lot of financial demands of people. Cryptocurrency turned out to be the savior, in this case, bringing a challenge for the banks to either embrace or go against the system.
Banking systems were reluctant to adopt cryptocurrency in the first place; however, with the progression of time and improvement in the basic structure of cryptocurrency, banks have moved to negotiate over the system’s adoption. However, the countries are divided across this notion, where countries like China and Vietnam are not willing to legalize cryptocurrency in any case. With no banking system support across the region, the crypto market is facing difficulty adjusting in the Asian region. The European banking platforms have a different narrative, where the banks are looking forward to having their own ‘digital currency’ system.
Nigeria is a very impressive example of how banks are looking to adopt crypto and the concept of digital currency on a large scale. Nigerian’s Central Bank has been successful in introducing eNaira, Nigeria’s digital currency.
The banks have not shown clear signs of adopting cryptocurrency yet; however, there are some critical concerns that they believe in addressing across the scale. Anti-Money Laundering and Know-Your-Customer are two important terms recognized in the traditional financial system.
Before understanding how AML and KYC are building up concerns for the banking structure over the adoption of cryptocurrency, it is important to understand how the network operates. Cryptocurrencies follow the concept of P2P (Peer-to-Peer) transactions without any central authority, which gave the user a concept of easy funds transfer without any hefty transaction fees. Transactions are carried out across the transaction ID over the blockchain, exempting the need to identify the transaction from the individual bank or the financial institution.
This concept is highly worrying for the banking sector, which raises the threat of money laundering and illegal activities across the system. With no system of AML and KYC across the crypto space, it became a prevailing concern of the banking system. Although banks are through the “problem” of decentralization, they are under the impression that crypto transactions cannot be tracked from AML and KYC considerations. The banks look for the only thing in a proper system that would cater to all concerns related to illegal activities and scams across the network. Cryptocurrency is undoubtedly the future, and its adoption is uncanny, which is realized by the banking sector. However, with the coverage of AML, KYC, and a few concerns of market volatility in the crypto space, banks can surely move towards the adoption of crypto on a large scale.