Understanding the Need for a Method of Identification to Cash Out Cryptocurrency

Identification is often required for numerous activities throughout our lives. These can range from travel, education, and employment to buying or renting a home. Transacting with cryptocurrency is increasingly becoming an important and frequent activity. Have you ever wondered why identification is typically required to cash out cryptocurrency? The reasons for requiring a form of identification in order to cash out cryptocurrency will be covered in this article. But first, let’s examine how a cryptocurrency exchange implements ways of identifying its users.

How Do Crypto Exchanges Implement Methods of Identification?

Crypto exchanges are known to have a system of identification in place. Each of them will be looked at in turn in this section. Explore now!

Utilizing KYC Scans For Authentication to Cash Out Cryptocurrency Securely

A KYC (know your customer) procedure is the first step of anti-money laundering (AML) due diligence and consists of three components. These are customer identification programs, due diligence, and continuous monitoring. A cryptocurrency exchange uses the KYC processes to identify and verify a new customer’s identity when they onboard them. These procedures are designed to help cryptocurrency exchanges better comprehend the actions of their potential clients and confirm their legality and to estimate the risk profile of their clients based on their proclivity for financial crime. Prior to being permitted to cash out cryptocurrency from an exchange, the KYC checks confirm that customers have been thoroughly screened for their financial history and other variables.

Dual-factor Identification

Crypto exchanges also use two-factor authentication for identification. To avoid theft and money loss on transactions, this technology prevents intruders from masquerading as someone else. It is also crucial for any company that deals with fiat currency. This is due to the fact that most governments demand this kind of verification in order to follow their rules. A two-factor authentication app on your phone will generate a code for you to enter on the exchange in order to gain access to your account.

Document Validation

Another method used by crypto exchanges for identification is document validation. To follow the applicable laws, crypto exchanges that deal with fiat currency must maintain a certain degree of compliance. Validating customer documents, which may be done directly or automatically, is a component of this compliance. To ensure that the documents provided by the customer seeking to cash out cryptocurrency are genuine and not fake, this verification is necessary.

Verification of Your Phone Number

Nowadays, our phones are as important as our credit cards and ID cards. Every phone number is unique and can serve as a method for verification. A text with a code can be sent to your phone. This code can be supplied to the exchange website to prove your identity. On the exchange site, the aim is to prevent fraud and other forms of abuse.

Why Do You Need a Form of Identification to Cash Out Cryptocurrency?

The main objective of requiring proof of identification is to provide protection against theft. This is done to reassure customers that they are secure when they cash out cryptocurrency. Additionally, this lowers the risk of legal trouble, boosts investor confidence, stabilizes the market, and lowers the chances of fraud and money laundering. However, some exchanges allow customers to withdraw cryptocurrency without providing proof of identity. This kind of trade is not suggested due to the propensity for high theft rates.


Now you know how cryptocurrency exchanges use methods of identification and the rationale behind why some exchanges require it before you can cash out cryptocurrency. Make sure to use an exchange that protects your investment from intruders.