Understanding KYC In The Crypto World

By Jay Dawson


Reviewed by: Jay Dawson


Crypto KYC

You may have encountered the KYC verification when you create an account in a cryptocurrency exchange. Not only for this but a KYC verification is required at many stages and for many purposes in the crypto realm.

You may not be unfamiliar with the KYC procedures and you have passed this at your bank and other traditional finance systems.

A question that we often get is about the necessity of KYC in crypto. Today we are answering that question.

Understanding KYC Crypto Requirements?

Let us start with KYC. We address the queries ‘What is KYC?’, and ‘What is crypto KYC?’ and more

What is Crypto KYC?

KYC, the abbreviation for Know Your Customer, is a set of standards that financial institutions practice to curb money laundering, fraud, terrorist financing, and corruption.

It is the mandatory check all individuals have to go through when they sign up for an account.

Crypto KYC

KYC identifies and verifies the identity of the customer. KYC checkups take place when you open a new account and also periodically.

You will need to provide certain valid IF proof to the financial body to verify your identity.

KYC conducts customer identification, and customer due diligence, assesses the risks associated, conducts ongoing monitoring, and reports all kinds of activities that are suspicious.

KYC crypto is predominantly adopted by cryptocurrency exchanges when you sign up for a new account on its platform.

With an account, you have access to trading, investing, and more. The anonymous nature of the cryptocurrencies makes it mandatory that you go through the KYC procedure.

Once you create an account, you will not be able to access any of the features or options, until you pass the KYC.

What details are obtained during the crypto KYC procedure?

  • Legal name of the individual
  • Date of birth
  • Residing address
  • National ID number

Typically, these are the required data. However, it may change from nation to nation. In the US, some states may ask you different things.

Along with this information, you may also be required to provide ID documents that confirm the details that you have provided.

Usually, you will have to submit a government-issued or approved photo ID proof that is valid and non-expired. You will be required to submit a proof of address, it can be a utility bill.

Note that some institutions may also require you to fill out a form online to complete the account creation process.

After collecting the KYC details and the documents, the crypto institutions may also run an underlying check using an identity verification service. This is to make sure that you have entered the legitimate details.

Why KYC for crypto?

A vast group of users may often wonder why these crypto exchanges require a KYC procedure. We are on the brink of addressing that:

Cryptocurrency as you know is a highly volatile digital asset. You can never predict the value of a crypto correctly, even the price predictions can not do that. The current trends may change at any time.

Rome was not built in a day, but a certain crypto can get built in a day, in the sense that it can dominate the whole market within a day. The giant exchanges may fall at night.

Also, crypto ensures privacy, confidentiality, and anonymity to its users. This can make it more difficult for the government and other financial enforcement bodies to monitor the crypto ecosystem.

The anonymous nature of crypto can make a playground for illegal financing such as terrorism funding.

Earlier there have been instances of multiple terrorist groups using the crypto platforms to raise money to fund their activities.

All such loopholes in crypto called for a set of stringent regulations that every single one needs to undergo to be deemed eligible to enter the crypto world.

What does crypto KYC do?

The KYC for crypto procedures protects the crypto exchanges and the financial infrastructure from money laundering and other financial crimes.

  • The Crypto KYC establishes the identities of all customers

  • It helps the exchange to keep a record of the verified identities of all the users present on the platform

  • It helps the exchange to understand the nature of a user’s crypto and other financial activities 

  • It helps to assess the risks associated with the users

  • It has the potential to detect certain users who may turn to terror funding or who may engage in illegal activities

  • It prevents all bad actors from practicing unlawful activities on the platform of the crypto exchange

  • KYC helps to understand the legitimacy and genuineness of each of the users

  • KYC plays a crucial role in determining the legitimacy of the funding source of the users

KYC proceeds may ask you for your personal details. At the same time, as we have already mentioned it may ask you to submit certain ID verifying documents. It may also include biometric identification.

Jay Dawson

Jay Dawson, a cryptocurrency expert based in Dallas, TX, is passionate about sharing knowledge on Bitcoin and other cryptocurrencies, ensuring traders stay updated with the latest trends. His goal is to empower others with valuable insights into the dynamic crypto market.

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