Cryptocurrency has been making headlines for years. Bitcoin, a popular version of virtual currency, rose to prominence in 2017, hitting the astronomical value of $19,783.06 per unit. However, since its peak, Bitcoin and many other cryptocurrencies have yet to see consistent growth and actually lost much of their value, as crypto adopters found them difficult to use as payment and maintain stable values.
That said, PayPal announced last week that it will allow its users to hold in their accounts and shop using cryptocurrencies across their network of 26 million merchants. This is big news for cryptocurrencies, as it legitimizes them as a mainstream payment method, potentially increasing consumer adoption — at least that is what PayPal is banking on. In addition, PayPal mentioned that they plan on expanding cryptocurrency to their Venmo app, a peer-to-peer and merchant payment application, further expanding adoption and crypto applications. In an update since this was first announced, PayPal has already seen a strong appetite for crypto adoption, so much so that they already plan on increasing weekly crypto purchase limits to $15,000.
While innovative companies such as Square and Robinhood have been allowing for investment in cryptocurrencies on their platforms for some time, PayPal’s user base is a game-changer and could scale crypto to over 346 million users while propagating crypto in internet-based commerce. This is exciting news for cryptocurrencies and their enthusiasts, as it makes it much easier to spend or liquidate their digital currency for goods and services. However, it’s not all clear blue skies. It’s worth noting that prior to its rise in popularity, cryptocurrency was mainly used for the purchase of illegal goods and services, such as illegal narcotics and off-shore gambling. Its inherent characteristics such as being nearly untraceable, made it a favorite for gray and black-market dealings.
A resurgence in popularity, in addition to new, convenient infrastructure for transacting with cryptocurrency, opens the door to illegal money-laundering operations that used to rely on other avenues due to crypto’s historical lack of liquidity. Without the right checks and balances, these technology companies are potentially opening themselves up to be exploited by the ill-intentioned.
Governments across the globe are keeping a close eye on these new developments, with the United States Department of Justice already cracking down on BitMex, a crypto trading platform for violating the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations. PayPal’s CEO, Daniel Schulman, has mentioned that crypto is an opportunity to “work hand-in-hand with regulators”. While cryptocurrency used to operate in blind spots, it has quickly become a more mainstream currency that is subject to policies and enforcement such as Know Your Customer (KYC) and AML.
The Socure Solution
PayPal, Square, Robinhood, and other companies likely to see a rise in crypto transactions should get their house in order to not only protect their users, but also make sure they are compliant with the applicable laws and regulations. Luckily they can pull from the playbooks used in the past by other fintech, banks, and applications for customer identification programs (CIP).
Socure’s holistic suite of compliance and fraud risk solutions helps businesses answer critical questions like, “Does this person exist?” and “Can I do business with this person?”— all via an automated, efficient process.
Our Intelligent KYC solution uses advanced search analytics to achieve the highest match accuracy in the industry while providing detailed risk and reason codes for actionable intelligence. We leverages over 5 billion data records from credit, utility, telecom, SSA eCBSV, and NIST 800-63 files to maintain a database of more than 250 million verified individuals, as well as a premium global watchlist utilizing over 1,100 sanctions and enforcement lists and more than 6,600 PEP and Adverse Media registers.