KYC stands for ‘know your customer’ and is the process of verifying the identity of the person who is about to use a financial or non-financial platform. With KYC being so important for people who use trading tools and exchanges, we’ll explain the most important elements that people need to understand about KYC.
Key Takeaways
- KYC stands for Know-Your-Customer and is implemented for companies to gather personal information about their users
- KYC is implemented by regulatory bodies to ensure they follow legal frameworks
- The KYC process is simple but requires users to provide their personal information as well as proof of residence.
- Adhering to KYC standards is crucial in the cryptocurrency industry to prevent fraud, ensure regulatory compliance, and foster a stable cryptocurrency market.
What is Know Your Customer (KYC) in crypto
Know Your Customer (KYC) is the process by which a financial institution verifies the identity of its clients. KYC, especially in the crypto and broader financial sectors, provides regulatory clearances for companies to operate within established legal frameworks. In the cryptocurrency industry, 97% of exchanges are KYC-compliant.
KYC is the foundation of anti-money laundering (AML) compliance, helping to prevent financial crimes. KYC is the first step in preventing illicit activities by collecting personal information, including birth date and personal ID number. A crypto company is responsible for verifying the customer’s identity and ensuring KYC compliance to meet legal requirements and secure onboarding. The verification process creates transparency and ensures that crypto companies comply with regulatory requirements.
Robust KYC processes are essential for maintaining trust and regulatory compliance in the crypto industry.
What is AML in Crypto
Anti-Money Laundering or AML is a prevention mechanism that uses KYC, which is part of the broader regulatory requirements. AML regulations require crypto exchanges to implement procedures to detect and prevent money laundering and terrorism financing by monitoring transactions, verifying user identities, and identifying high-risk users. Anti-Money Laundering is a more in-depth approach to reviewing, identifying, and combating criminals from laundering illicit funds through cryptocurrency transactions.
Difference Between KYC and AML
There are a few differences between KYC and AML; however, AML is a broader compliance process, whereas KYC focuses primarily on the initial process.
KYC aims to verify customer identity during the onboarding process. It is part of establishing who the customers are.
AML covers ongoing compliance measures, including transaction monitoring, suspicious activity reporting, and maintaining comprehensive policies to prevent money laundering throughout the customer relationship.
Why Do Crypto Exchanges Ask for KYC
Cryptocurrency exchanges require users to KYC after reaching a financial threshold to prevent money laundering, and also to comply with regulatory frameworks. Each crypto exchange requires specific licenses to operate in the jurisdiction.As most jurisdictions classify crypto exchanges as money services (MSBs), they are subject to the same AML and KYC requirements.
Additionally, exchanges have shifted their position on KYC requirements. Previously, they viewed KYC as a grey area, but now over 62% of exchange users see KYC as a positive outcome, as it provides more security when trading and storing higher capital. The number of exchanges that’ve become KYC compliant has increased from 85% in 2024 to 92% in 2025 – driven mainly by institutional appeal and higher regulations.
Crypto exchanges can mitigate risks and avoid penalties by operating within the jurisdiction where they are registered. By implementing strict KYC, which protects against fraud and terrorist financing, they prevent higher penalties, losing their licenses, which results in higher losses than a single user.
To attract institutional capital, crypto exchanges must be compliant with regulations. Robust KYC procedures are therefore essential not only for the growth of the crypto sector but also to ensure exchanges can draw capital, which helps maintain stability and market integrity.
What Are Crypto KYC Requirements
KYC requirements in crypto require users to provide their full legal name, date of birth, proof of address, and email address. The above-listed requirements are the bare minimum users need to provide, but they can change due to the country’s legislation.
Here are the types of documentation which is typical for KYC:
Identity documents: These can include government-issued ID, a passport, or residence permits, if applicable.
Proof of address: They need to be either issued by a state authority or be part of a contract (such as a utility bill, bank statement, or lease agreement). As we’ve seen, documents shouldn’t be older than 3 months or, in some cases, 6 months.
Biometric verification: We noticed that most KYC now require biometric verification that needs to be done live. We had to use advanced biometric technologies to scan our faces.
Can you trade crypto without KYC
Trading crypto is difficult if there is no KYC in place, because exchanges or platforms limit deposits and withdrawals. The same applies if we wanted to receive USDC payments. Payments are processed, and in case they are over an imposed threshold, users need to undergo KYC.
We found users can trade, exchange, and send crypto using decentralized platforms (DEXs) like Uniswap, which operate without any central authority. However, it might be the case that crypto wallets used to interact with the exchange might require KYC in the future.
Receiving cryptocurrency is possible without verifying our identity, but it becomes more limited when users want to access exchanges, exchange their assets for fiat currency, and interact with centralized platforms. Trading without KYC significantly increases your exposure to fraud, scams, and security risks.
How does KYC work on crypto exchanges
The KYC process on crypto exchanges begins with account registration, which requires users to create an account using an email address and a secure password. The users need to submit basic personal details (full name, address, and date of birth). A crucial step involves the secure upload of clear photos or scans of required identification documents. Many exchanges also incorporate biometric verification, where users complete facial recognition by taking a selfie or live photo.
More complex cases or discrepancies may require a manual review by a human agent, a process that can take several business days. Upon successful verification and approval, users are granted full access to the platform’s features, often including higher transaction limits. It is worth noting that while most reputable exchanges aim to complete KYC verification within minutes to a few hours, the duration can vary.
Secure your crypto future with proper compliance
Understanding what KYC is and why it is important is essential for anyone who uses or wants to use cryptocurrencies in the future. These regulations exist to protect investors, prevent financial crimes, and legitimize the crypto market. While the verification process may seem cumbersome, it’s a small price to pay for the security and legitimacy it brings to your crypto activities.
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FAQ
What are know your customer checks?
Know Your Customer checks are verification procedures that confirm a customer’s identity and assess their risk profile based on the documents and personal information provided.
Is KYC safe for crypto?
Yes, KYC is generally safe when conducted by platforms that require the process to use advanced encryption and security measures to protect customer data.
How long does KYC take?
We found that verification can take up to 10 minutes to complete and may take up to a few days to be fully verified by the platform.
Is the travel rule KYC?
The travel rule is related to but separate from KYC. While KYC focuses on customer identity verification, the Travel Rule requires financial institutions to share originator and beneficiary information for transactions above certain thresholds (typically $1,000).
