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Crypto account opening process

Lesson in Course: Crypto (beginner, 5min )

We're ready to start investing in crypto. What do we need in order to open an account at a centralized exchange?

The decentralization of crypto can be exciting, offering pseudo to complete anonymity on purchase. We might find it incredibly refreshing in a world where rules exist everywhere, investing how we want at any time.

But, we can't buy many things using crypto, so we need to convert our unrealized gains into cold hard cash. The only legal way to convert that cash is through a centralized exchange, where we swap our crypto for fiat. All fiat currencies are regulated, and as such, so are CEXs.

Opening an account

Much like opening a brokerage account to trade stock, CEXs abide by KYC and AML. Here's what we should consider as we plan to open our account.

KNOW YOUR CUSTOMER

Know your customer, or KYC, is a series of questions and the identification processes that brokerages ask every new user. The required information includes:

  1. Social Security Number (often a picture of your Social Security Card is required)
  2. Drivers license / State ID / Passport
  3. Bank account statement or other proof of fund and address
  4. Proof of Permanent Residency Card (if you are not a US citizen)

Many CEXs allow you to open an account and a wallet without providing KYC information; however, all non-verified accounts have limited functionalities.

ANTI-MONEY LAUNDERING

Anti-money laundering, or AML, are restrictions placed on financial institutions to do their part in preventing money laundering and moving money around for criminals. 

While regulations have lagged, AML is finally starting to catch up to CEXs. Governments are putting pressure on CEXs to stem criminal cash flow. We might not be allowed to withdraw money during periods of investigation and high volume due to AML protocols.

 

MINIMAL DEPOSIT AMOUNT

Certain exchanges require minimum deposit amounts, so we'll have to transfer cash into the account when we open it.

For example, Coinbase requires $50 while Binance.US currently does not.

Access to coins

A CEX will have access to a specific list of supported coins.

Not all exchanges will have access to the coin we want. However, most of them support the largest market cap coins. For the cryptocurrencies not supported, we will have to use DEXs. The list shouldn't dissuade us from opening a CEX since we still need to convert fiat into crypto and eventually back into cash.

 

If we have a large amount of money to invest, we should use multiple CEXs and hire a tax accountant to help manage the taxes. Spreading out our money through multiple CEXs helps us reduce our counter-party risk to exchanges being hacked. The lesson about picking a CEX will help us decide which ones are right for us.

For example, check out the video below on Mt. Gox!

At Archimedes, our goal is to make investment literacy accessible and free for everyone.

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