Why is KYC mandatory in CEX?

I’m confused now, why do exchanges need to force kyc? If the exchanges is already secure enough, do we still need KYC verification?

jaja24 said:

I’m confused now, why do exchanges need to force kyc? If the exchanges is already secure enough, do we still need KYC verification?

Click to expand...

that is compliance with relevant laws and regulations

So they don't get ducked over themselves.

It's government's attempt to prevent things like money laundering and to generally identify the activity of people acting against their interest. The main point of crypto is to provide a decentralized, permission-less platform to exchange financial goods. This means there's not much you can do to directly regulate on-chain activities, and regulating financial activity is one of the most high-octane forms of power you can wield in the modern world, so goverments are not keen to part with it. Crypto <--> fiat currency on and off ramps are under their purview and they leverage these as regulatory choke points.

It's becoming trivial to deanonymize someone's transactions on a public chain like BTC/ETH, so If I know who you are when you hop in and out of fiat, I can trace your activity and see if you are laundering. This is why crypto mixers, which obfuscate your activity by making many complicated unpredictable intermediate exchanges, are popular. Zero knowledge proofs via currencies like XMR make on-chain activity opaque from the get go.

Doesn't matter how secure the platform is. They all fall under local/state rules. They have to obey or close their services there. That's why KYC is mandatory in almost every finance related platforms.

It is needed to minimize and stop FRAUD

jaja24 said:

I’m confused now, why do exchanges need to force kyc? If the exchanges is already secure enough, do we still need KYC verification?

Click to expand...

They’re mostly compliant to the same ruleset as most banks, where you wouldn’t be able to open an account either without proper documentation. For crypto though there’s a lot of KYC free solutions if you know where to look.

all need kyc .

Because it is a centralized entity and must follow the laws of where they are registered and are running their business.

If you dont want KYC... DeFi

It's literally my fault

to prevent and mitigate possible risks of CEX.IO being involved in any kind of illegal activity.

CEX = Centralized Exchange
Centralized means that the money in Centered in one place. There for they are tracking the funds and they are obligated by law to know regarding each individual that they hold funds in their name.