If you use cryptocurrency, chances are that you will need to get a wallet at one point or the other. Crypto wallets are extremely important because they ensure that your tokens are safe, retrievable at all times, and can be transferred at will. But as you go through the process of securing a crypto wallet, you’ll have to decide whether you want a wallet with or without KYC.
Know-your-customer (KYC) requirements apply to both crypto wallets and exchanges and essentially refer to a service provider asking for your personal information before delivering the service. For a crypto wallet, this could include your name, government ID, address, and so on. This is typically done to stay within regulatory requirements and as a security measure.
A no KYC crypto wallet is one that you can set up without providing any details to the wallet provider. In this case, you simply request a crypto wallet and set up the password and recovery phrase. For all intents and purposes, the wallet provider does not know who you are, and you are completely anonymous. Both types of wallets have pros and cons, which make them ideal for different investors.
Take a crypto wallet with KYC requirements. The major benefit of this type of wallet is that there is less risk of identity theft. After all, there is a reason why so many service providers from email addresses to banks require you to set up profiles. If at any point you think your account has been compromised or you need additional support, you can reach out to your service provider and get the help that you need. On top of this, using services that enforce KYC means that they are likely to comply with regulators, which means that they are especially reputable and can be counted on.
Using a no-KYC crypto wallet also comes with its own benefits, mainly having to do with privacy. While cryptocurrency transactions are generally private, the process of setting up a crypto wallet and transferring funds can leave your information vulnerable. Even if no one can tell that you are behind certain transactions on the blockchain, your sensitive information being in the hands of a crypto wallet provider or exchange makes you vulnerable. But by acquiring a wallet without KYC requirements, your sensitive details are completely private, as not even the wallet provider knows that you are the one behind the crypto transactions.
Even with these, we have to consider the cons of each option. A crypto wallet that has KYC requirements has certain downsides. If the wallet provider or exchange is compromised, which has happened in the past, the details of your wallet setup can be revealed to outsiders. With this information, every transaction you’ve completed across the blockchain can be traced to you. Without KYC, it is a jumbo of numbers and letters that cannot be pinpointed to any specific individual. With it, whatever privacy you are looking to enjoy via crypto is essentially destroyed.
On the other hand, a no-KYC crypto wallet means that your level of support is limited. If your wallet has been compromised or you have a technical issue, there is a limit to how much support or help a crypto wallet provider will give you if they can’t confirm that you are even a customer. If you use a no-KYC crypto exchange as your provider, it is safe to assume that they are not working in tandem with any regulators and thus, your funds are likely uninsured.
Essentially, both a KYC and no-KYC crypto wallet come with some pros and cons and it is up to each individual investor to determine which risk they’re willing to take.
