What Crypto Businesses Must Know
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With the semi-anonymous nature of cryptocurrencies, digital finance opened doors for misuse. To counter this, regulators globally are imposing Know Your Customer (KYC) and Anti-Money Laundering (AML) rules on crypto firms. In this post, we’ll explore what KYC in crypto means, when it’s required, how it works, and how a crypto business can adopt it. What Is KYC? KYC, short for “Know Your Customer”, is the procedure by which a financial service provider verifies the identity of a client. The primary purpose is to reduce risks related to financial crimes, such as money laundering, terrorist financing, and fraud. In practice, KYC involves collecting personal information (e.g. name, address, date of birth, ID documents) and confirming that this information is accurate and belongs to the actual user. Techniques can include checking government-issued documents, biometric verifications, and cross-referencing public databases. While KYC has its roots in traditional finance (e.g. banks), it’s now a critical component in legitimizing the crypto space and ensuring compliance with legal frameworks. Which Crypto Services Are Affected by KYC? Not all crypto platforms are created equal, whether KYC is needed depends primarily on jurisdiction and transaction volume. But many of the following types of services often require KYC: Cryptocurrency exchanges (centralized) Custodial wallet providers Peer-to-peer (P2P) marketplaces OTC (over-the-counter) desks Lending platforms (crypto collateral) Payment processors accepting crypto Token sale platforms / ICOs / IEOs Key Factors Regulatory jurisdictionMany countries legally mandate KYC for crypto firms. In the U.S., for instance, crypto exchanges must register with FinCEN under the Bank Secrecy Act and enforce user identity verification. In the European Union, crypto businesses are classified as “mandatory entities” under the 5th Anti-Money Laundering Directive (AMLD5), with further reinforcement from AMLD6 and forthcoming regulations like MiCA. Volume of operationsA smaller operation or one handling minimal transactions might delay intensive…
Filed under: News - @ October 20, 2025 2:25 pm