Why Is KYC Necessary at Most Crypto Casinos?

Categories: Gambling Guides |
Published by: BTCGOSU |
Last updated: 05/08/2022


We talk loads about KYC in our casino reviews, but it recently hit us that we do not have a dedicated article regarding these procedures. What they precisely are and how they work. So, we decided to create this short guide that will give you a quick rundown concerning the essentials of the Know Your Customer process. The history behind this measure and why most online casinos these days implement it.

Before we start, we would like to point out that the majority of online gamblers we know hate KYC verification. It’s a headache they perceive has little upside for them, which is not 100% true, something we elaborate on below. Also, newcomers to this sphere should understand what KYC is and why they should complete this procedure as soon as possible after registration. Because it can stop them from enjoying the fruits of their good fortune, potentially letting a big win go to waste if they fail to comply with it.

How KYC Came to Be

As you likely know, KYC stands for Know Your Customer/Client. It is a security standard first introduced in the investment sphere, where advisors require client information to assess their risk tolerance and financial position. It got conceived as a requirement that looked out for brokers’ and clients’ interests. Its initial aim was to ensure that adherence to various policies, transaction monitoring, and risk management.

For those in the securities industry, the KYC standard became an ethical requirement in July 2012 via FINRA’s (the Financial Industry Regulatory Authority) Rule 2090 and Rule 2111. However, in 2014, FinCEN (the US Financial Crimes Enforcement Network) officially proposed it to become part of a broader regulation for customer due diligence in 2015. That proposal clearly defined the baseline KYC requirement for the investment sector.

During the conception of these customer identity verification measures, it became clear that they could get used to lower the incidents of money laundering and terrorism financing. Hence, FinCEN required financial institutions to verify the identities of their beneficial owners and customers, with more scrutiny applied to entities suspected of engaging in nefarious activities based on their risk profile.

Why Did Online Casinos Adopt KYC?

Per multiple industry estimations, the global online gambling market should start pulling in annual revenues of close to $158 billion in the next six years. Thus, it has grown to become a massive sphere since its inception in 1994.

Given that fraudulent activities online and offline have grown over the past decade, most countries’ governments’ have seen stringent implementation and compliance with KYC policies as a decent safeguard against multiple novel crimes, viewing this as a necessary evil. Aside from the financial arena, it is not strange to see pharmacy chains and hospitals asking for identity verification before providing their services. So, there is nothing weird about online casinos featuring the same identification methodologies.

Gambling operators based in territories with strict gaming regulations get legally obligated to adhere to any relevant anti-money laundering procedures. If they don’t, they face penalties. Seeing as online casino companies spend millions on their betting hubs, which cater to players from dozens of countries around the globe, they find it easier to incorporate a KYC policy than risk the ramifications of not having adequate player pool info. Accordingly, even operators that do not get obligated by their regulators to have a KYC policy opt for one because their services may get used by gamblers from countries with very different laws than those enforced in their base of operations. To avoid onboarding fraudsters in disguise and provide necessary user documentation to law enforcement and government financial authorities, the safer route is to have a KYC procedure in place, regardless if this obligation exists or not. The risk of boosting a platform’s appeal by omitting it is simply not worth it.

For example, a crypto gambling site licensed by Curacao eGaming gets required to fashion its AML and KYC policies. Yet, it does not specify their boundaries, giving operators free rein regarding what they may be. Other regulators clearly define the KYC rules their licensees must incorporate, while others entirely lack any mention of identity verification criteria in their licensing agreements.

Can a Crypto Casino Choose Not to Implement KYC?

Depending on its license, yes, it can. The benefits of this lay in that no KYC may up a site’s enticement factor, as most players do not like giving away their personal info to companies that run their business online. Yes, such a stigma is still alive. Moreover, most crypto gamblers choose to play with digital coins to enjoy the potential anonymity that comes with this practice. Plus, the fast transfer speeds cryptos allow.

Without argument, KYC eliminates any hint of gaming anonymity, and it can draw out an initial or a sizeable withdrawal for up to two days if everything goes smoothly.

An online casino can also decide to forego a gaming license and operate license-less on a good faith basis with its users. Multiple brands have done so successfully for years. In fact, none of the original provably fair dice sites had a gaming license, and some are still going, boasting thousands of active accounts.

Still, we have reached a point where most gambling sites have a KYC process, caving into the demands of various markets and the times we live in.

What Are the Crypto Casino KYC Requirements?

To complete an online casino KYC procedure, you must send in a copy/photo of a government-issued ID. A driver’s license or passport will also suffice. Proof of address such as a utility bill will also be necessary, and it must clearly show your place of residence and full name.

When requesting to withdraw a vast sum from your gaming balance, an operator may go the extra mile and ask that you provide proof of funds. In lay terms, a source of your finances. Usually, sending a screenshot or a photo of a bank statement should be enough to comply with this requirement.

As a rule of thumb, you will have two weeks to complete a started KYC procedure. If you don’t submit the asked paperwork or answer a phone call from your chosen operator, he retains the right to close your account and confiscate your funds. Note that these decisions rest at his discretion, which sucks for online gamblers because they have to open a dispute with the site’s regulator if it has one, in that scenario, and await the outcome of those proceedings. Sadly, few international regulators care about players getting wronged by operators. They only care about raking in their licensing fees. That is why they exist in the first place.

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