As cryptocurrency undergoing multiple controversies, people are exploring what is KYC and how can it benefit them. Many crypto exchanges around the globe making KYC verification mandatory to stop uninterrupted access. On the other hand, people do not like regulations where they need to share their data. In these circumstances, it is essential to understand Know Your Customer in crypto and its benefits for traders and answer public security concerns.  

What is KYC?   

KYC refers to know your customer, and it also means know your client. In simple words, it is a process that financial institutes use to verify their customer ID by using different means like ID cards, utility bills, or social security numbers to make the system secure.   

In these types of systems, customers need to submit their KYC details to start trading, and they can change their information as well. The most important thing to remember that you can change your user’s name, but you also need to update your KYC. 

What is the General Process of KYC?  

KYC processes may vary per business nature, but they have the same objectives. Know Your Customer usually revolves around data collection and verification. Moreover, it also monitors client activities such as browsing and purchasing.   

KYC verification process is divided into three parts:   

Customer Identification Program  

CIP is the first and effortless process as it involves customer data collection and verification. Banks go through this process during enrolment, while crypto exchanges require it after registration.   

Customer Due Diligence  

After ID verification, an organization has the authority to dig deep by executing background screening of a customer. It aims to demonstrate the risks as it will figure out customers who were involved in fraudulent activities in the past.   

Ongoing Monitoring   

Ongoing monitoring makes sure that KYC information is updated and allows the system to track suspicious activities. You might be thinking that what is KYC monitoring in the case of cryptocurrencies. The answer is very simple, as blockchain makes the system transparent and secure, it becomes easier to figure out an unusual activity. In most cases, exchanges have the authority to suspend customer account and take regulatory actions.   

Why its Mandatory for Cryptocurrency Exchanges?  

Know Your Customer regulations are obligatory for crypto exchanges as they comply with rules and laws. In the past, crypto exchanges did not request KYC details. The increase in prices and people’s interest has also shot up the concerns about crimes like money laundering and hacking. Nowadays, cryptocurrency exchanges use “Know Your Customer” to track transactions that make the system free of scams and money laundering. Without KYC, an exchange is liable when a user commits a crime. 


Know Your Customer is a critical element of the anti-money laundering process in the financial world, including cryptocurrencies. These regulations offer a crime-free and protected business environment for all users. They may disturb anonymity, but it is necessary to make the system secure and reliable by tracking suspicious activities on time.
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