I. Core Purposes of Real-name Authentication

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT):

In compliance with global financial regulatory requirements, financial regulatory authorities around the world (such as the US Financial Crimes Enforcement Network (FinCEN), the European Union's Fifth Anti-Money Laundering Directive, the People's Bank of China, etc.) require financial service institutions (including cryptocurrency exchanges) to identify the identities of their customers to prevent illegal activities such as money laundering, terrorist financing, and tax evasion through the use of cryptocurrencies. For example, the Financial Action Task Force (FATF) clearly requires virtual asset service providers (VASPs) to conduct strict customer due diligence (CDD).

Risk of Anonymity:

The decentralized nature of cryptocurrencies has been used for anonymous transactions, but it has also given rise to issues such as fraud, money laundering by hackers, and dark web transactions. Real-name authentication can achieve the traceability of the transaction chain by binding the user's real identity (name, ID card/passport, address, etc.), reducing the abuse of anonymous accounts.

Account Security Protection:

Real-name authentication information can serve as the basis for account recovery and dispute resolution, preventing users from suffering asset losses due to account theft or identity forgery.

Preventing Market Manipulation:

The real-name system can track the flow of large-value transactions and combat the behavior of manipulating market prices through multiple anonymous accounts (such as wash trading and false trading volumes).

II. Specific Roles of Real-name Authentication

Compliance:

Exchanges collect users' identity documents (ID cards, passports, driver's licenses), address proofs (utility bills, bank statements), biometric information (facial recognition, fingerprints), etc. to establish user identity profiles for regulatory authorities to review at any time.

Identifying High-risk Users:

By screening whether users are on the sanctions list (such as the list of the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury), prevent users from sanctioned regions or individuals from using the platform.

Tracking Abnormal Transactions:

When abnormal behaviors such as large-value transfers and frequent cross-regional logins occur in users' accounts, the exchange can quickly locate the source of the risk through the real-name information, triggering manual review or freezing of the account.

Preventing Account Theft:

Combining real-name authentication with two-factor authentication (2FA) can improve account security. For example, when a user reports an account loss, the exchange needs to confirm the identity through the real-name information to prevent others from retrieving the account under false pretenses.

Basis for Dispute Resolution:

In case of transaction disputes (such as failure of deposit to arrive or abnormal withdrawal), the real-name authentication information can serve as the only legal proof of the user's identity, accelerating the resolution of the problem.