How Cryptocurrency Exchanges Use Facial Recognition for eKYC to Improve User Experience
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How Cryptocurrency Exchanges Use Facial Recognition for eKYC to Improve User Experience


Cryptocurrencies, like Bitcoin (BTC) and Ether (ETH), to name some, have rapidly become popular financial assets for consumers. At least 16% of Americans already hold cryptocurrencies, and they’re only continuing to grow exponentially.

Compared with traditional currencies and securities, like stocks and bonds, cryptocurrencies have returned record high returns, which has triggered a boom in crypto investments globally by major financial institutions and day traders alike. However, they’re also accompanied by higher risk, both in extreme price volatility and transactions or processing. As a new and unregulated form of currency, some have leveraged them for fraudulent activity and other illegal actions, which has led to growing attention from regulators around the globe.

One of the most common forms of identity verification is Know Your Customer (KYC). KYC helps financial institutions avoid participating in fraudulent activity by confirming their customer’s identity. Most major cryptocurrency exchanges currently have KYC processes to ensure they are not liable for illegal activity that could take place from activity on their platform. However, weaknesses still exist that can easily be improved with assistance from Artificial Intelligence (AI).  

This article will walk through an introduction to cryptocurrency and eKYC, as well as how cryptocurrency exchanges can use AI technologies like facial recognition KYC technology to comply with regulations and improve the user experience.

What is cryptocurrency?

Cryptocurrency is a digital currency that operates on the blockchain. Thanks to this structure, the cryptocurrency market doesn’t close each day like the stock market. Instead, these assets can be traded at any time.

Transactions take place through the connection of multiple encrypted blockchains.The blockchains’ ledgers use distributed ledger technology (DLT), so the transaction history is spread throughout all the blockchain users’ computers and stored simultaneously and synchronously. This measure makes the blockchain tamper-proof. 

The difference between fiat currency and cryptocurrency

Fiat currencies like the U.S. Dollar and the Euro are issued on demand by various countries’ governments, and the currency market helps determine their value and exchange rates. Cryptocurrencies on the other hand, are not legal tender issued by governments or central banks. They are decentralized currency that stores information in the blockchain through computer-generated passwords.

Cryptocurrencies are also issued in limited amounts. Looking at Bitcoin as an example, 17 million Bitcoins have been “mined” since its inception in 2009. With new Bitcoins mined every hour, output speed will decrease until total circulation reaches its upper limit of 21 million in 2140. Additionally, user supply and demand determine the consensus-based value of cryptocurrency.

Type of Currency
Issuance method
Governments and central banks of individual countries
Computer- and cryptographically-generated
Regulatory method
Centralized, controlled by the government
Decentralized, with no government or agency control
Unlimited, issued by individual governments according to their needs
Specific, finite quantity for each currency type
Depends on the market, transactions, and laws and regulations
Priced according to user supply and demand
Storage method
Held by individual users or institutions (e.g., countries, banks)

In terms of U.S. dollars, the value of one Bitcoin grew dramatically in 2021, from $20,000 in January to $68,000 in November, before dropping to $44,000 in February 2022. This extreme volatility and potential for rapid growth and quick returns has attracted many new retail investors to the market.

source: Google

How to trade cryptocurrency

Cryptocurrency transactions occur through three main channels: exchanges, trading platforms, and over the counter (OTC).

Exchanges & Trading Platforms

An exchange provides the exchange rate or price of fiat currency and cryptocurrency. Users directly exchange cryptocurrency on the platform by remitting dollars and storing exchanged currency in a cryptocurrency wallet. Highly rated crypto exchanges available in the U.S. include Coinbase, Binance, Robinhood, Gemini, and Kraken.

Trading through exchanges uses non-real-time exchange rates, so there may be a gap between visible prices and current market prices. However, the advantage is that trades do not need matching and can be executed immediately. Nevertheless, many disadvantages also exist, including fewer currencies available for trading and the inability to use currency to purchase other currency.

Exchange services often create trading platforms for private institutions and companies to buy and sell crypto. After users register as members of the exchange, they must complete identity authentication and review by the exchange before beginning to conduct transactions on the platform.

One advantage of these services is that they’re more flexible than pure exchanges. Using fiat currency to purchase and sell cryptocurrencies is similar to the exchange. They also allow users to exchange different cryptocurrencies. Furthermore, they use real-time quotes, so prices are closer to actual market prices

Over the counter (OTC)

This refers to person-to-person (P2P) private transactions between cryptocurrency users or through exchanges that support OTC services.

Why do cryptocurrency transactions need to implement KYC?

What is KYC?

KYC is the abbreviation for “Know Your Customer”. It’s an account review method that uses personal information, credentials, and other personal documents to confirm one’s identity. KYC is a regulatory obligation for many large financial institutions and services to help illegal activities through financial services.

What is eKYC?

eKYC stands for “Electronic Know Your Customer.” Compared with current KYC processes, which require complicated procedures, in-person applications, lengthy paperwork, and non-standardized procedures, the entire method is completed electronically. eKYC empowers financial applications like secure mobile banking and payment services, taking out insurance policies electronically, and opening bank accounts remotely.

eKYC for opening accounts remotely can significantly simplify the process for applicants. Applicants can use AI image recognition to confirm their ID cards’ authenticity and match their faces. In other transactions, AI-based facial recognition also allows users to securely log in and use financial services, especially without the need to enter long, complex passwords. 

Learn about how to use facial recognition to move from KYC to eKYC and boost fraud prevention.

How does eKYC technology help cryptocurrency exchanges improve the user experience?

All major cryptocurrency transaction platforms include an identity verification process to protect against fraud. This can include uploading multiple identity documents, sharing confirmable personal details, and more. eKYC through facial recognition can simplify this process by providing rapid identity verification.

Difficulties faced by traditional KYC methods

BitoEX, a Taiwanese cryptocurrency trading platform rated in the top 50 by global industry confidence, deployed a real-name identification process in June of 2021 to comply with a new Taiwanese law mandating KYC for cryptocurrency platforms. Their process included having users upload images of the front and back of their personal ID cards, as well as take a selfie holding their ID, to complete the level B verification. This process led to several difficulties, including:

  1. The process of taking a selfie while holding an ID is complicated
  2. During this process, the user must write down the account registration date and name of the exchange on a piece of white paper, personally sign the document, take a selfie while holding up both the paper and identity document, and finally upload the selfie. This step discourages many users from proceeding with registration.

  3. Users need to input ID card information manually
  4. Users sometimes need to manually fill in information from their ID card, such as their name, ID card number, state, date of issue, or address. In addition to spending unnecessary time filling in information manually, it’s also easy to make an error.

  5. The exchange’s reviewers compare information visually
  6. The exchange’s reviewers must carefully examine the proof of identity for authenticity, look at the selfie information for correctness, check for any forgery attempts, and visually compare the ID to ensure it belongs to the applicant.

How to improve the user experience of trading cryptocurrency with eKYC technology

To solve the problems that arose after implementing KYC authentication, BitoEX collaborated with CyberLink, developer of AI facial recognition. CyberLink’s solution, FaceMe® eKYC & Fintech, uses AI technology to accelerate the user application process and avoids the risk of associated with their current identity verification process. The solution includes the following:

  1. Authentication of ID card
  2. During the application process, the user authenticates his or her identity by using the mobile phone’s camera to scan the front and back of the ID card. FaceMe® eKYC’s AI recognition also identifies numerous security features of the ID card upon authentication.

  3. Liveness detection/anti-spoofing
  4. Through the mobile phone’s 2D or 3D structured lenses, FaceMe® detects whether the person in front of the lens is real or not. This prevents people from using photos and videos to commit identity fraud.

  5. Comparison of user against ID
  6. FaceMe® uses AI technology to compare whether the photo on the ID card and applicant in front of the camera are the same person.

  7. OCR for auto-filling information
  8. After completing identity verification, applicants can use Optical Character Recognition (OCR) technology to pull information such as the user’s name, ID card number, date of issuance, and address from the ID card. FaceMe® then automatically fills in the application form, thus avoiding the hassle of users filling it in manually.

Through FaceMe® facial recognition technology, BitoEX can now fully automate the entire authentication process. BitoEX reviewers only need to make the final user confirmation. If BitoEX does not require supplemental information, FaceMe® can dramatically shorten the authentication process from 10 days to one. Users can now use facial recognition to log in to the service or conduct transactions, saving the trouble of entering passwords while improving the efficiency of account openings and transactions.

FaceMe® eKYC & Fintech: a solution designed for cryptocurrency and various financial services

CyberLink has integrated AI, facial recognition, and video conferencing technology into one with FaceMe® eKYC & Fintech, a complete solution designed for banking, financial services, and insurance (BFSI). The solution provides a variety of eKYC software development kits (SDKs) that can integrate into any remote insurance application or account opening process, including facial recognition, liveness detection, identity card authentication, comparison of a person against identification, and document verification.

FaceMe® eKYC also provides a videoconferencing SDK that assists financial and insurance companies in building remote videoconferencing services through private or Google Cloud Platform’s public cloud services. SDKs for iOS and Android are even available for integration into companies’ mobile app services, allowing recording during insurance application processes to help with auditing and verifying compliance with financial service regulations.

FaceMe® Fintech - sdk

You can read our in-depth report about introducing eKYC facial recognition solutions with liveness detection to fintech applications. You can also visit the FaceMe® eKYC & Fintech website to learn more about specific solutions designed for financial applications.

FaceMe®: CyberLink’s Complete Facial Recognition Solution

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