KYC (Know Your Customer)
The identity checks financial firms run to confirm who their customers are before opening accounts.
Know Your Customer rules require exchanges to collect ID — a passport photo, sometimes a selfie — before you can trade or withdraw. Regulated platforms like Coinbase and Kraken can't legally skip it. The aim is to keep criminals and sanctioned parties out of the system.
It sits in tension with crypto's privacy ethos. Decentralized exchanges and self-custody wallets generally need no KYC, since there's no company to do the checking. That gap is exactly what regulators have been moving to close since 2023.
Related terms
The laws and procedures meant to stop criminals from disguising illicit money as legitimate funds.
Custodial WalletAn account where a third party holds your private keys for you, like a bank holding deposits.
CeFi (Centralized Finance)Crypto services run by companies that hold your funds and keys, much like a bank or traditional broker.
Non-Custodial WalletA wallet where you alone hold the private keys, with no company able to freeze or recover your funds.