Crypto Dictionary
KYC
Definition
Know Your Customer. A process used by financial institutions to verify the identity of their clients.
Deep Dive
KYC, which stands for "Know Your Customer," is a critical regulatory process primarily mandated for financial institutions and businesses dealing with monetary transactions. It involves verifying the identity of clients to assess their suitability and potential risks of illegal intentions, such as money laundering, terrorist financing, and fraud. The process typically requires customers to provide personal identification documents like passports or driver's licenses, proof of address, and sometimes even biometric data or source of funds information.
Examples & Use Cases
- 1A user signing up for a centralized cryptocurrency exchange like Coinbase or Binance is required to upload a government-issued ID and provide a selfie for verification before being allowed to trade or deposit large sums.
- 2An investor participating in a Security Token Offering (STO) must complete a comprehensive KYC/AML (Anti-Money Laundering) check to confirm their identity and investor accreditation status.
- 3Fiat on-ramp services, which allow users to convert traditional currency to crypto, often implement strict KYC procedures to comply with financial regulations in their respective jurisdictions.
Related Terms
AML (Anti-Money Laundering)Financial RegulationIdentity Verification