KYC is short for "know your customer" and is a vital regulatory obligation crypto exchanges and platforms must carry out to comply with international anti-money laundering and counter-terrorism laws. Most cryptocurrency exchanges have made KYC mandatory to remove the stigma of anonymity that has made the crypto market infamous and prevented several governments from legalizing and accepting this asset class.
The Know Your Customer regulations require users signing up on crypto exchanges to upload and submit documented proof of identity. Exchanges are then expected to verify the user’s identity against the submitted documents.
In recent years, several countries have started granting cryptocurrency exchanges and wallet providers the status of financial institutions. As a result, they must comply with financial regulations in these markets, a critical factor that requires them to perform KYC and verify all registered users on their platforms.
The KYC process reduces the risk of potential misuse of a platform for money laundering activities and prevents anonymous transactions, deposits, and withdrawals. KYC compliance enables users access to a broader range of services, letting them enjoy the complete crypto experience without fearing regulatory authorities.