However, the purpose of this piece is to investigate whether or not crypto exchanges that do not need users to provide KYC information are just as secure as those that do.

The Bitcoin (BTC) Standard has generally fostered anonymous peer-to-peer transactions; nevertheless, many people believe that the adoption of Know Your Customer (KYC) technologies in bitcoin is a deterrent to the standard.

On the other hand, regulators continue to push for the implementation of know your customer and anti-money laundering (AML) policies as a technique of protecting investors from the dangers of financial crime and assuring their safety.

Investors may still select cryptocurrency exchanges that encourage more anonymity by not enforcing KYC processes, despite the fact that the majority of cryptocurrency exchanges have begun to embrace regulatory requirements in order to remain at the forefront of crypto's development into the mainstream. This is because investors want to remain at the forefront of crypto's development into the mainstream. If an investor opts for the second option, does this mean they are taking a risk with their money?

A Minute Concern Regarding Trust

The majority of the time, anonymity functions in both directions. In order to dodge the scrutiny of the law, owners of cryptocurrency exchanges that do not comply with Know Your Customer requirements sometimes try to conceal their identities. As a consequence of this, investors are required to have a significant amount of faith in the individuals who are in charge of operating the exchange.

On the other hand, decentralized exchanges like dYdX use trustless protocols to build a trading platform that is managed by the community. Despite the fact that the platform is not required to perform KYC checks, this, in turn, inspires confidence among investors.

When trading on platforms that do not need Know Your Customer checks, it is essential to do background checks on both the platform itself and the people who run it.

It Will Never Forget - A Blockchain Never Forgets Anything That It Has Recorded

Despite the fact that traditional finance advocates portray cryptocurrencies as tools for money laundering, the number of illegal cryptocurrency transactions has been steadily decreasing year over year. Despite the ease with which cryptocurrencies can be used without KYC authentication, a Chainalysis investigation found that just 0.15% of all cryptocurrency transactions in 2021 were associated with nefarious activities. This is despite the fact that KYC authorization is not required to use cryptocurrencies.

In addition, because the transactions on the blockchain are irreversible, the authorities are able to trace back the proprietors of transactions. This makes it less likely that criminals will use cryptocurrency networks, whether KYC or non-KYC, to assist their activities.

As a result of the immutable nature of blockchain technology, law enforcement agencies all around the world have been able to identify con artists, fraudsters, and money launderers who committed crimes years in the past.

Without the Keys, There Are No Coins

When working with bitcoin exchanges, losing control of one's assets can be one of the most problematic and costly issues that can arise. The private keys for cryptocurrencies that are held on cryptocurrency trading can only be obtained from the exchange itself.

Investors put themselves at risk of permanently losing their funds if they use unvetted cryptocurrency exchanges that tout the absence of know-your-customer (KYC) standards. Even if investors are required to pass over their crypto assets to other parties in both types of exchanges, the level of trust that exists between investors and regulatory agencies is far higher in KYC-compliant exchanges. Cryptocurrency investors, regardless of whether they utilize KYC or not, are similarly susceptible to external hazards such as the owner's motive and unethical sales practices. In addition, investors in cryptocurrencies receive no support from the government.

Investing with a non-Know Your Customer (KYC) cryptocurrency exchange also comes with constraints on the overall value, the tokens that are available, and other services offered by the exchanged operators.