A Brief History of Cryptocurrency

Until late 2017, cryptocurrencies were, for the most part, an unknown to the general public. That all changed in December 2017 when the price of Bitcoin surged to $19,783 USD per coin at its peak. This drastic increase in price valuation caused shockwaves to ripple around the world. An astonishing 45% of people first heard about cryptocurrencies either through online news or traditional media. Cryptocurrencies had now become a household name.

However, for the individuals who wanted a piece of the action and to buy their own cryptocurrency, the customer journey varied significantly. Due to a wide choice of cryptocurrency exchanges and the KYC processes that each crypto exchange had in place, coupled with loose global regulation of cryptocurrencies meant that the customer journey differed vastly from one exchange platform to the next.

Fast forward to the present, and while the current price of Bitcoin is sadly a far cry from the once anticipated $20,000 price valuation–cryptocurrencies are here to stay. However, it is not just the price of bitcoin and other cryptocurrencies which has changed since the boom in late 2017. Cryptocurrencies have since been subject to increasingly stringent regulation in the wake of negative press associated with crypto exchange data breaches, stolen coins, and fraudulent ICOs.  

This increase in local regulation of cryptocurrencies has now caused huge discrepancies from one region to the next. For example, the Reserve Bank of India has banned banks from “dealing with or settling virtual currencies”,  while Switzerland, on the other hand, has embraced cryptocurrencies by providing very clear legislation and attractive tax policies for crypto. Swiss Rail, the state railway for Switzerland, now even accepts BTC as a payment option.

What do these discrepancies mean?

Whilst most regions have introduced legislation to enforce basic KYC / AML checks which have helped to narrow the differences in the customer journey when buying or exchanging cryptocurrency, crypto exchanges remain a grey area for most countries. With virtually every region in the world planning to introduce further local legislation, this area will continue to be a minefield for both exchange platforms and customers.

The Problem

Despite the uncertainty regarding future crypto legislation, more and more people are joining the crypto ecosystem and purchasing cryptocurrency. As of December 2018, there were almost 32 million bitcoin wallets registered.

Yet, despite the increasing popularity, there still remains a lack of efficient and effective customer onboarding practices. Studies show that less than 5% of respondents surveyed found existing customer onboarding practices effective. Moreover, 21% of exchange platforms display subpar business practices.

These ineffective practices are shocking, especially when set against the higher risk backdrop which is associated with cryptocurrency. As many as 14% of KYC/AML checks result in crypto exchanges not opening or closing accounts. As a comparison, for traditional financial services firms in the UK, 25% of applications are abandoned due to KYC friction.

Flaws in current practices

As exchange platforms wrestle to create the ultimate customer journey and finely balance a frictionless customer experience whilst maintaining effective KYC/AML and fraud prevention measures, most platforms experience one or more of the following pain points:

The most successful and sophisticated exchange platforms deploy third-party solutions to enable swift identity verification. However, this comes at a higher cost to the exchange platform.

The solution

The most successful exchanges and e-wallet providers utilize a layered approach to finely balancing a frictionless customer experience with fraud prevention. Combining frictionless risk assessment tools such as email risk assessment, device ID and ID verification.

ID Verification

For many customers, the ID verification process will make or break the customer journey. Additionally, under the vast majority of local regulation, ID verification is also required by law which means that a smooth process is even more critical. Failure to deploy an accurate automated solution results in manual agent reviews. This causes a back and forth with the customer and merchant to provide additional documents and photos to validate the identity, creating excessive friction for the customer. Alternatively, crypto exchanges and e-wallet providers who invest in sophisticated and accurate ID verification solutions experience higher customer conversion rates and gain a competitive edge over their competition. However, accurate and effective ID verification solutions come at a cost, so how can an exchange platform or e-wallet provider help to mitigate these costs?

Device ID

Device intelligence is used to identify high and low-risk customers based on the behavior of the device used. This solution is completely invisible and frictionless to the customer, and using the device intelligence can help to flag your high-risk customers at the start of the customer journey. This helps to reduce customer onboarding costs by flagging would-be bad guys before they reach the costly ID verification stage.

However, the customer information behind the device can be limited as many consumers routinely change their devices which limits the quantity of data that can be leveraged for risk decisions. In today’s fast-paced market, many customers routinely change their device or upgrade to a new model every few years. In the EU, the average smartphone lifetime is around 29 months. In the US, that figure is only about 18 months.

Email Risk Assessment

Similarly to device intelligence, an email risk assessment can also be used to reduce friction. In the modern market, customers already expect to provide their email address when signing up for a new service or opening a  new account – it is usually the very first piece of information they’re asked for. An email risk assessment is a real-time risk decision platform using the email address as the core data element. This risk decision is invisible and frictionless to the customer, as well as nearly instantaneous usually only taking a fraction of a second to complete. This enables the exchange platform or e-wallet provider to segment their high and low-risk customers immediately and automatically. This check also gives exchange platforms more confidence that customers will pass the more costly KYC checks. Crypto exchange platforms will be able to reduce manual reviews by immediately rejecting known bad actors and customers with excessive high-risk indicators.

Unlike device ID, the email address is a unique global identifier because it is required for the vast majority of account sign-ups and transaction checkouts. The email address is truly your customers’ digital passport. Furthermore, customers tend to keep their email address for a very long time. 91% of customers have had their email address for more than 3 years (DMA Insights Consumer Email Tracking Study). These factors combined mean that each email address is able to tell a story and accurately predict risk factors for transactions.


For exchange platforms looking to take advantage of the current notoriety of cryptocurrencies, they’ll need to first implement measures to stop application abandonment and customer friction. By implementing a robust risk assesment e-wallets and exchange platforms can rest assured that their process will be seamless for legitimate customers while automatically weeding out known bad actors and drastically reducing manual reviews.

Download the infographic today for a handy reference on how to attract good customers to your crypto exchange while fighting fraud and reducing friction!

If you’re ready to take the next step towards identifying your legitimate crypto customers, schedule a demo with us today!