Know Your Customer (KYC)

Know Your Customer (KYC) is the identity-verification process centralized crypto platforms use to confirm a user's real-world identity before granting full access to trading, deposits, or withdrawals. It typically requires a government-issued ID such as a passport, national ID, or driver's license, a selfie or live facial scan matched against that document, and sometimes proof of address like a recent utility bill.

Most exchanges apply a tiered system. A basic tier unlocks limited trading and small withdrawal caps within minutes, using automated document recognition and liveness detection. Higher tiers, needed for larger transfers or fiat withdrawals, add proof of funds and manual review that can take a day or more. The same identity data feeds sanctions and politically-exposed-person screening, and supports the FATF Travel Rule, which requires exchanges to share sender and receiver information whenever a transfer crosses a jurisdiction's reporting threshold.

Regulation has made KYC harder to avoid. The EU's Markets in Crypto-Assets (MiCA) framework requires every licensed crypto-asset service provider to run full identity checks and ongoing due diligence, and comparable obligations exist under the US Bank Secrecy Act and the UK's Money Laundering Regulations. Exchanges that skip or weaken these checks have faced billion-dollar settlements and license revocations in recent years.

KYC mainly applies to centralized exchanges and custodial services; decentralized exchanges and self-custody wallets generally collect no identity documents at all, a gap regulators are now working to close.