How Consumers—and Fraudsters—are Circumventing ID Verification on Crypto Sites (2024)
As cryptocurrency trading gains momentum and becomes a mainstream investment strategy, we are naturally seeing many crypto trading sites become prime targets for fraudsters as well. Afterall, fraudsters follow consumer trends with eagle eyes and act quickly when certain types of merchandise (or currencies) rise in popularity. Our Q1 2021 Digital Trust & Safety Index bears this out as well: crypto exchanges across Sift’s network had the second highest attempted fraud rate of any vertical in 2020.
The very nature of cryptocurrency—the ability to buy and sell it anonymously—is part of what makes it so attractive for fraudsters. By using either stolen credit cards or account credentials to trade anything from Bitcoin to non-fungible tokens (NFTs), cybercriminals can liquidate accounts and vanish into thin air.
Businesses have successfully fought back against the wave of crypto-hungry scammers, however, by implementing fraud prevention solutions on both the back-end (with ML-based, fraud-prevention technology) and the front-end (with “Know Your Customer” technology). And just like a cat-and-mouse game, fraudsters appear to have found ways to get around these Know Your Customer (KYC) systems.
KYC is largely defined as a process that businesses use to verify that a given customer is who they say they are. This includes verifying a customer’s ID but it also encompasses additional pieces of information that help determine customer legitimacy by ensuring the different pieces of information match up to the “true” user.
Our Trust and Safety Architect team has been following conversations taking place across the web, particularly on open forums on Reddit and Telegram, and found that frustrated consumers and fraudsters alike are using new tricks to bypass ID checks in order to gain access to crypto exchanges they normally would be barred from using. Many consumers are looking to beat KYC requirements for a wide array of reasons; some hold the belief that enforcing identification on these sites goes against the ethos of crypto trading; others are simply minors (not to be confused with crypto miners) who aren’t legally allowed to trade; still others want to avoid the tax obligations.
And, of course, scammers in the ever-growing Fraud Economy trying to use stolen credentials or payment information are working together to gain access to valuable and easily laundered cryptocurrency. Their techniques range from selling photos of Driver’s Licenses and selfies to using cell phones to record rotating synthetic faces in order to pass facial recognition checks. Below are some examples of the KYC workarounds that we’ve discovered being shared in various forums:
Driver’s License + Selfie: Many crypto sites require users to upload official identification/driver’s license as one of the steps to gain access to their sites. When paired with a selfie of the person, this step in the signup flow is designed to automatically accept or deny access. We found several examples of forged ID cards and selfies being sold to would-be crypto traders.
Synthetic Biometrics: Similar to the above, some crypto exchanges require more than a selfie, but a live, moving face in order to gain access. Fraudsters have been peddling digital rendering of faces to crypto enthusiasts looking to beat automated verification tools.
VPN: As we found in a Reddit forum called “Guide to crypto for USA under 18,” minors and fraudsters alike have been able to gain access to crypto exchanges through a relatively simple process that hinges upon using virtual private networks. By changing their IP addresses to ones originating in countries with fewer crypto-specific regulations, they may be able to bypass any KYC systems altogether.
Fraud-as-a-Service: We’ve tracked fraudsters advertising their services to the “fraud-curious” across Telegram as a way to steal from businesses. Likewise, we now regularly see professional scammers offering their services as stand-ins who will agree to complete KYC on behalf of someone else, either using their own IDs and faces or those of a third party looking to make a quick buck.
While those eager to avoid ID checks have found workarounds to certain KYC implementations on crypto sites, these verification tools serve an important purpose: ensuring legitimate and of-age consumers can access the sites that they want to visit and do business on. As importantly, crypto exchanges leverage these tools to stay in compliance with government regulations.
While KYC technology can be effective, businesses should use it as part of a layered approach to prevent nefarious activity—particularly fraud. When combined with an ML-powered Digital Trust & Safety strategy, fintech businesses, and crypto exchanges, in particular, can stop bad actors both on the front end and with every transaction,all without disrupting the experience for legitimate transactions.
Thus, we need to collect the necessary information in order to allow our users to transact on the Crypto.com Exchange on top of the general KYC verification process. ... Required Information:
First and Last name.
Nationality.
Date of Birth.
Email.
Mobile number to receive a one-time passcode (OTP)
ShapeShift is a crypto exchange that allows you to buy Bitcoins without verification. However, for that, you need to buy altcoins or other digital tokens before buying. Verification: You can buy Bitcoins with no ID, but you need to buy altcoins or other digital tokens like Litecoin, Ripple, Tether, etc., before buying.
IDV verification in cryptocurrency is the process by which crypto exchanges check the official ID documents and proof of address of new customers in order to be certain that these individuals are who they say they are. IDV is one of the main KYC requirements in cryptocurrency.
In the fight against fraud, digital identity verification is an important part of crypto companies' arsenal, providing the information needed to quickly spot and stop fraudsters at scale, while delivering the seamless and secure experience that users now expect when trading online.
No, for a couple of reasons: Most crypto exchanges and trading platforms require proof of ID for credit card purchases. Even if you find a platform that allows you to buy crypto without ID, you'll still be paying for your transaction with a credit card that's linked to your identity.
Crypto.com does not allow users to deposit, trade, or withdraw crypto anonymously at any trading level. You will need to submit information like ID and photo for verification in addition to using the name, phone, and email. Even starter-level accounts will need to be verified at Crypto.com.
Yes, a number of crypto exchanges do not require any KYC. Some of these exchanges have a limit to the amount of crypto you can withdraw, such as KuCoin, Krake, and others. On the other hand, there are some that have no restrictions on how much you can withdraw, such as CoinSwitch.
Access the Document Verification prompt.Select your preferred identity document type and upload method.Follow the on-screen instructions then select Upload. You'll receive an email confirmation when the verification has completed.
In order to protect our customers, prevent fraudulent activity, and be fully compliant with regulations for the trading of digital assets, we require the submission of personally identifiable information. This includes the submission of selfies, SSN, bank statements, etc.
Many people believe that Bitcoin is anonymous. However, this is not the case. Bitcoin, contrary to popular belief, is traceable. While your identity is not directly linked to your Bitcoin address, all transactions are public and recorded on the blockchain.
Our primary purpose in collecting personal information is to provide you with a secure, efficient, and customized experience. Additionally, verifying your identity helps to prevent fraud from occurring on our platform. We will never sell or rent your personal information to third parties.
Bitsquare is a peer-to-peer marketplace for cryptocurrencies like Bitcoins. It is a fully decentralized exchange that requires no name, email ID, or verification. To be a truly anonymous peer-to-peer network, it uses Tor and doesn't hold fiat or bitcoins on their servers or in their account.
When you buy or sell bitcoin at an ATM, it will not be necessary to produce your SSN. Depending on the amount of the transaction, you may need to provide only your phone number, or you might need to supply your phone number and a photo ID. Either way, your SSN will not be involved in the transaction.
Does Coinbase report to the IRS? Yes.Coinbase reports your cryptocurrency transactions to the IRS before the start of tax filing season. As a Coinbase.com customer, you'll receive a 1099 form if you pay US taxes and earn crypto gains over $600.
Coinbase is easy to set up but requires some information, including your legal name, home address, date of birth, last four digits of your Social Security number and how you plan to use Coinbase. That's to comply with federal regulations. Here's how to begin. Download the Coinbase app for iPhone or Android.
Yes. Coinbase Pro is simply a different account/membership level that uses the traditional Coinbase exchange, and inherits all of its security guarantees (as well as potential flaws).
Transactions may be declined for several reasons: You have insufficient funds in your account. You surpass the spending limit of $2,500 a day. You try to spend at a prohibited merchant category (learn more at "Where can and can't I use the Coinbase Card?").
You may have answered security questions incorrectly. Your credit report may be locked or frozen. Your credit profile may contain erroneous information. You may have already verified your identity with ID.me.
A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain. Bitcoin transactions are publicly accessible because of the transparent nature of blockchain technology.
Because someone's wallet address does not have to be anonymous but can be hard to find, a Bitcoin wallet address is called a pseudonym, an alias, which is different from someone's actual name. The data is not linked to an identity, but it is still possible to trace someone's identity or a pseudonym.
In addition, exchanges like Coinbase, Gemini, and Kraken issue 1099 forms to customers and to the IRS reporting on your crypto transaction activity. If you don't report transactions that have been reported to the IRS via Form 1099, you may automatically be sent a warning letter about your unpaid tax liability.
Driver's License + Selfie: Many crypto sites require users to upload official identification/driver's license as one of the steps to gain access to their sites. When paired with a selfie of the person, this step in the signup flow is designed to automatically accept or deny access.
At Coinbase we go to great lengths to keep all of your sensitive information safe. Account numbers and routing numbers are stored using bank level AES-256 encryption on our servers. In addition, all traffic goes over SSL to prevent third parties from eavesdropping on your connection.
2FA will be required for both addresses whitelisting and initiating crypto withdrawals. To safeguard your funds, you are recommended to enable the 24-hour withdrawal lock, which protects your account by disabling withdrawals for 24 hours to addresses that have been newly whitelisted.
If you're linking a bank account in the United States, you'll be prompted to enter Know Your Customer (KYC) details to verify your identity, including your name, contact information, and Social Security number. Fully verified users can deposit funds and make withdrawals up to Crypto.com's daily and monthly limits.
As a regulated financial services company, Coinbase is required to identify the users on our platform. Per the Coinbase User Terms, we require all customers to verify their identity to continue using our service.
Yes, a number of crypto exchanges do not require any KYC. Some of these exchanges have a limit to the amount of crypto you can withdraw, such as KuCoin, Krake, and others. On the other hand, there are some that have no restrictions on how much you can withdraw, such as CoinSwitch.
Because Crypto.com doesn't support fiat withdrawals just yet, you don't have immediate access to your money. Selling your crypto is the only way to access your fiat money through Crypto.com.
Yes, Crypto.com does report crypto activity to the IRS. US users who earn $600 or more in rewards from Crypto.com from Staking, Earn, Referrals, or certain other activities will receive a 1099-MISC tax form and the same form will be sent to the IRS.
Yes, you can buy Bitcoin without verifying your identity. There are two ways: decentralized exchanges and Bitcoin ATMs. Although both options allow you to buy crypto without identity verification, they work much differently than the usual process.
Another way is to use an online exchange such as Coinbase or Gemini. These exchanges allow you to buy and sell bitcoin with other users around the world. Finally, you could also use a Bitcoin ATM to convert your BTC into cash without needing an SSN or bank account.
Introduction: My name is Margart Wisoky, I am a gorgeous, shiny, successful, beautiful, adventurous, excited, pleasant person who loves writing and wants to share my knowledge and understanding with you.
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