KYC Crypto – How Crypto Exchanges Prevent Money Laundering

The crypto market is uninterruptedly seeing improvements despite persistent instability, as noted by Forbes, many prevalent currencies have lately driven a $300 billion price boost.

Whilst the industry will remain to alter, the upsurge of crypto exchanges proposes that the awareness is here to stay. This permanent existence is by SEC, CFTC, and FinCEN’s statement that classified crypto trades as MSBs (Money Service Businesses). Moreover, making them subject to anti-money laundering and KYC rules under the Bank Secrecy Act of 1970.

However, it’s one thing to recognize the requirement for meeting know your customer compliance and another to incorporate these rules in masses. Here’s what crypto companies should know about KYC and adhering to its compliance.

KYC Crypto – An Overview

Know your customer is the anti-money laundering first stage. When a company onboards a new customer, the KYC process is instantly followed to monitor and check the consumer’s ID. These procedures allow financial institutions to assess a customer’s risk profile according to his/her propensity for financial crime.

Cryptocurrency exchanges also need KYC to comply with AML rules. The prevention of criminal activities such as money laundering and terrorism financing. Additionally, cryptocurrency exchanges must utilise the KYC process to:


  • Verify their customers’ confidential data
  • Acquire a better understanding of their potential clients’ activities
  • Validate their legality

What are the Perks of KYC Crypto?

Cryptocurrency exchanges benefit significantly from the regulation sector despite hurdles and operational adjustments while incorporating online KYC. The following factors demonstrate the perks of crypto KYC.

1.    Better Transparency and Trust Among Consumers

Validating customer identities boosts transparency, clarity, and client trust. When customers feel confident about their cryptocurrency exchange and that it is taking preventive measures to secure their accounts, they will use the service fearlessly.

2.    Fewer Scams and Money Laundering

Forbes states that more than 80,000 crypto scams occurred last year, almost 24,000% more than in 2016.  Robust IDV can significantly lower illicit activities and boost the market image.

3.    Lowered Legal Risk

As legal demands evolve, robust KYC procedures keep companies on top. KYC process enables VASPs to detect and deter cloned identities, money laundering, whilst making proper assessments of consumer risk. It is possible with the help of government-issued documentation. This helps in reducing regulatory risks, providing time to focus on more important things like conversion rates and adherence to compliance.

4.    Enhanced Market Stability

The cryptocurrency market is notoriously volatile because of suspicious, risky transactions. Moreover, KYC programs that feature enhanced IDV contribute to the market’s overall value growth.

Step-by-Step Procedure for eKYC Solution

For both new and returning customers, the eKYC method outperforms conventional usage. This single technique covers all requirements for consumer authentication, including customer due diligence, ongoing monitoring, and onboarding.

Verification of Documents

The initial step in document checking, known as e-KYC, is to automatically evaluate scanned identification documents consumers submit. The optical Character Recognition (OCR) system is utilised from scanned ID documents to retrieve the client’s personal information. AI-powered authentication is performed by comparing the document patterns with pre-defined, actual document categories.

Video KYC

To give clients more ways to prove their identities, the eKYC procedure uses a type of authentication approach known as video. The KYC video procedure involves a professional verifying the user’s identity by comparing their real-time video with their identity papers.

Current Screening

The onboarding process alone is not risky in terms of fraud. Existing customers in the banking industry frequently turn out to be dishonest. Financial institutions are advised to continuously monitor client transactions and notify the authorities of any unusual motion to prevent being duped by impostors. A step in the process involves checking to see if any existing clients are on the PEP and global sanctions lists.

Is KYC safe in crypto?

The KYC crypto procedure prevents money laundering and other unlawful financial activity. By requesting personal information from clients, businesses may screen out fraudsters and protect themselves. Hackers could, however, still try to steal customer data from exchanges.


Overall, the crypto community sees KYC methods as an important evil. Although it isn’t immaculate, it’s one of the finest conducts to guard connections against scams and misconduct.

Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.