Why Is Every Cryptocurrency Exchange So Difficult?
As many exasperated users can attest, the experience of signing up to a cryptocurrency exchange can be fraught with difficulty. It may even be the exact opposite of the crypto ‘promise’. Crypto is, after all, meant to be borderless, anonymous, and open to anyone. Cryptocurrency exchanges, by contrast, are firmly mired in a world where borders matter, bureaucracy runs rampant, and gatekeepers get to decide who gets an account and who doesn’t.
Here is the distinction: cryptocurrency itself is borderless and open to all, but the online crypto exchanges, used for acquiring it are not. Once you have the cryptocurrency, the system works as advertised – as long as things stay within the cryptocurrency ecosystem, expect low-cost, near-instant execution, and seamless experience.
But making a fiat money transfer to obtain the cryptocurrency (or sell cryptocurrency back into fiat money) re-introduces the banks and their regulations. Note that this is not a concern if you acquire the cryptocurrency through mining, or in exchange for goods or services, or in any way that doesn’t involve a transfer of fiat money.
To be fair to the exchanges, the poor user experience isn’t entirely their fault. The crypto exchanges don’t have a good way to collect electronic fiat money payments from their users without having a bank account. And as soon as they want to get a bank account, the cryptocurrency exchanges must play by the bank’s rules.
Online crypto exchanges always face an uphill battle to get a bank account. This hurdle stops many would-be crypto exchanges from ever opening their doors. Compliance officers at banks are very risk-averse creatures, and many of them would simply rather not deal with cryptocurrency exchanges. The default position when something outside the box crosses their desk is to say “no”.
To get a “yes”, the crypto exchange needs to collect all the same information from their customers that the banks themselves would collect. This is in order for the banks to comply with their own Know Your Client (KYC) and Anti-Money-Laundering (AML) requirements. So the issue isn’t really with crypto, but rather with the banking system. It’s a good reminder, if one were needed, of the frustrations with the financial system that crypto is seeking to disrupt.
Sign-Up / Verification
Once you have chosen one, brace yourself for paperwork, demands for proof of identity – and frequently, rejections if your application does not fit the strict standards of the cryptocurrency exchange.
Step 1. Enter Your Email Address And Create A Password
As mentioned in the article on security, make sure that the password is unique and impossible to guess. It should not be a dictionary word, and it should use a combination of numbers, lower-case letters, upper-case letters, and symbols. Use a password management tool to generate this random password, and to store it for later use.
Step 2. Enable Basic Security (Two Factor Authorization)
This part was also explained in the article on security. Follow the prompts of the cryptocurrency exchange to get 2FA enabled.
Step 3. Upload Verification Documents
Although cryptocurrency is anonymous, your account at the online cryptocurrency exchange most certainly isn’t. Every online cryptocurrency exchange is different, but some of the documents you may need to upload include:
- Identification document (e.g. passport, drivers license, government-issued ID card) – sometimes both the front and the back.
- Your date of birth and ID number must be clearly visible.
- It must not be out of date.
- Make sure that all edges are visible.
- Proof of address (e.g. bank statement, utility bill).
- It may need to be dated recently – e.g. within the last 3 months.
- May need two forms of identification.
- A screenshot of yourself
- Possibly holding your identification document and/or with a piece of paper showing the date and your signature.
- You may be asked to keep a neutral expression (don’t smile).
- Remove any hats or anything that obscures your face.
I cannot emphasize this enough: read the instructions carefully, and do exactly what they say. If you are asked to upload a .jpg file of no more than 2 megabytes, make sure that’s what you do.
Also, take special care to ensure the information always cross-matches. If your identity document says “Rebecca”, then that’s what you should enter – exactly as it appears – even if everyone calls you “Becky”. If you are asked to submit two proof of address documents, make sure that they show exactly the same address. This may seem like excruciating detail, but it will be well worth it if this guidance saves you the annoyance of having your verification application rejected.
Universally, there is very little flexibility to be found in these rules. For example, some exchanges may only accept a passport as a valid identification document for certain countries. If you don’t have a passport, that’s just too bad.
Run through the following checklist before submitting your identity verification:
- Images are clear (not blurry / out of focus)
- Photos are not too dark / too much glare
- No part of the image is cut off
- Remember to attach an image of the back of your identification document (if they request it)
- The document is valid (not expired)
- No fingers holding the identification are obscuring some part of it
- Not wearing glasses or a hat when sending the screenshot (especially if you were not wearing these in your identification document)
Step 4. Wait
The cryptocurrency exchange needs to review the documents that you submitted, and this needs to be done by a real human being. If they have a backlog of applications, you might need to wait several days, or even several weeks. Unfortunately, there is nothing you can do to speed up the verification process. Submit your application well in advance of your desire to actually start trading.
Many online cryptocurrency exchanges are fast-growing startups, struggling to keep up with the load of applications coming their way. Compliance departments can become overwhelmed if too many people apply at once, which especially tends to happen when cryptocurrencies have been experiencing strong recent price growth (resulting in lots of new people wanting to get a piece of the action).
You can use the waiting time to sign up to other online crypto exchanges – that way, even if you are rejected by the first cryptocurrency exchange you applied to, you may get approved by others. You really only need to be approved by one exchange to get started, and you increase your odds if you get the clock ticking on more than one cryptocurrency exchange.
Step 5. Receive Notification Of Outcome
Once the cryptocurrency exchange finally gets around to checking your documents, you will receive a message informing you whether or not you have become verified. The bad news – if you are not approved, you need to start again. Frustratingly, these compliance departments will hardly ever say why your application was turned down – all you will get is “no”.
You can try contacting them to ask for an explanation, but don’t get your hopes up. These exchanges don’t invest a lot in customer support. They don’t have a lot of staff answering phone calls and emails. Don’t be surprised if your query simply refers you to their “Frequently Asked Questions” page, or is even ignored altogether.
If you are rejected, your only options are to try another cryptocurrency exchange, or resubmit to the exchange that denied you. Some exchanges will have a stand-down period for failed applications (for instance, you might need to wait 30 days before you are even allowed to try resubmitting your documents). You can see now why it is so important to get your application as watertight as possible the first time around.
Hopefully, this doesn’t happen to you. If your verification is approved, you will be able to make a deposit and get started with trading cryptocurrency in earnest. In the next article in the series, we’ll move on to funding your account and buying and selling.