KYC (Know Your Customer)

This is typically done by collecting identification documents, proof of address and other personal information. Traditional financial institutions such as banks have long required customers to complete KYC. This is a strict regulatory requirement in most jurisdictions, intended to combat money laundering, terrorist financing and other illicit financial activities.

However, for the early years of the crypto industry’s existence, many exchanges operated with limited identity verification.

With more people now using digital asset services, these platforms have widely implemented varying levels of KYC. Most platforms now require users to provide a government-issued ID, such as a driving licence or passport, to unlock basic functionality. Customers designated as high risk, or those dealing with large amounts of funds, might be asked to complete additional steps.

While these checks help regulated crypto platforms meet their compliance obligations, they introduce some concerns over data privacy. Storing large amounts of customer data in one centralized database can make these platforms attractive to hackers. Several major exchanges have fallen victim to customer data breaches in the past.

Not all crypto services require KYC, particularly those that reside onchain. Most decentralised exchanges, DeFi protocols and self-custody wallets do not require customers to submit identity documents for access.