Why Identity Verification is Required to Open a Cryptocurrency Exchange Account

Why Do Cryptocurrency Exchanges Require Identity Verification?#

Many users feel resistance when faced with mandatory identity verification processes while registering on digital asset trading platforms. This concern is not only prevalent among ordinary investors but also among seasoned professionals who harbor doubts about submitting biometric information. The anonymity initially advocated by cryptocurrencies starkly contrasts with real-world regulatory requirements, raising the following core question: Does transferring digital assets out of a real-name platform mean completely exposing the flow of funds? Does the phenomenon of ransomware specifying Bitcoin payment addresses validate the myth of cryptocurrency anonymity?

This article deeply analyzes the underlying logic of trading platforms implementing real-name verification and discusses the security issues surrounding sensitive information. First, we reveal the regulatory landscape through typical cases:

International financial giant HSBC was fined $1.9 billion by the U.S. Department of Justice due to anti-money laundering loopholes. Investigations showed that the bank not only provided funding channels for Mexican drug cartels but also opened secret accounts for sanctioned countries. Similarly, Standard Chartered Bank was fined $132 million by the UK's Financial Conduct Authority for similar violations, with the money laundering scale reaching as high as $265 billion.

These cases confirm the ironclad rule of modern financial regulation: licensed institutions must build a robust anti-money laundering system. As a hub connecting fiat currency and cryptocurrencies, digital asset trading platforms are naturally included in the same regulatory framework. If a platform allows unverified fund flows, it risks facing hefty fines or even criminal liability. From the operator's perspective, a complete KYC mechanism serves as both a compliance moat and a firewall against the risk of criminal fund inflow.

Is There a Risk of Information Leakage on Trading Platforms?#

The likelihood of compliant trading platforms actively selling user data is extremely low, stemming from two core constraints:

South Korea's leading exchange Upbit faced regulatory intervention and a crisis of user trust due to incomplete KYC processes for over 500,000 accounts. This incident directly confirms that user data security is the foundation of a trading platform's survival. Mainstream platforms are committed to building century-old brands, and any data leakage scandal would trigger massive user migration.

However, the risk of information leakage exists not only on the platform side but may also arise from the following aspects:

Telecom Operator Monitoring: SMS verification may expose the connection between users and the platform.
Malicious VPN Theft: Free proxy services often implant data collection backdoors.
Device Security Vulnerabilities: Unencrypted devices are susceptible to man-in-the-middle attacks.

Recommended Compliant Trading Platforms#

Choosing licensed institutions is the primary principle for risk avoidance. The following platforms have passed strict regulatory reviews:

1. OKX or Alternative Entry #

Assets Under Management: $17.1 billion (latest valuation in 2025)
Trading Varieties: 620 cryptocurrencies (including 25 newly listed projects)
Average Daily Trading Volume: $16.05 billion
Compliance Advantages: Holds dual licenses from Dubai DFSA and Singapore MAS, backed by strategic investment from Silicon Valley legend Tim Draper. Continues to lead in market share in Asia, offering a full range of services including spot, futures, and options.

2. Binance #

Assets Under Management: $12.85 billion
Trading Varieties: 780 cryptocurrencies (most comprehensive in the industry)
Average Daily Trading Volume: $19.025 billion
Platform Features: User base exceeds 150 million, with a technical architecture supporting millions of concurrent transactions. It is recommended to use a reliable VPN in conjunction.

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