More than half of all crypto exchanges have weak or no ID verification

More than half of all exchanges worldwide have weak KYC identification protocols - with exchanges in Europe, the U.S. and U.K. among the worst offenders, according to a new study by blockchain analysis firm CipherTrace.

CipherTrace analyzed more than 800 decentralized, centralized, and automated market maker exchanges and found 56% of them did not follow KYC guidelines at all despite anti-money laundering regulations.

The highest number of such exchanges are in Europe - a region renowned for stricter regulations.

The U.S. U.K and Russia are the three countries with the highest numbers of exchanges with weak KYC. Singapore is also at the top of the pack when it comes to counts of combined weak and porous VASPs.

This appears to be deliberate - of these exchanges, 85% had a frail KYC framework.

This implies some exchanges are hiding their jurisdictions to avoid having to register or comply with AML regulation.

The report notes that 70% of exchanges registered in the Seychelles have poor KYC norms, making the small island country a breeding ground for potential money launderers.

CipherTrace noted that even though $7.9 million of crypto stolen in the KuCoin hack was sold on decentralized exchange Uniswap, it wasn't laundered there.

"These are all financial activities and they are likely subject to various laws already, including securities law, potentially banking and lending laws-definitely AML/CTF laws," said SEC Crypto Czar Valerie Szczepanik earlier this month.

Dave Jevans, CipherTrace's chief executive officer, said he didn't believe DeFi protocols would accept regulations easily.