Know Your Customer (KYC) is the process whereby a business verifies the identity of its clients. It’s a mandatory process for banks, lenders, insurance providers and any other money service business, regardless of size. The KYC process allows companies to verify their customers are who they claim to be and that they’re not engaging in criminal activities when using their services.
KYC processes vary across institutions and may require different types of information. For cryptocurrency, this is a gray area as some exchanges require users to be verified immediately while others don’t require it until fiat becomes involved.
This is where Finder’s KYC guide comes in. It provides all the information needed to go through any KYC process. This includes what information will be required, why it’s necessary, and the basic steps to getting verified. Read on to find out everything you need to know about KYC.
This is not an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade or use any services.
KYC is necessary to buy cryptocurrency, at least when purchasing with fiat, because of anti money laundering (AML) regulations. AML was introduced in 1989 following recommendations of the Financial Action Task Force. AML has different legislation in various regions, which helps explain the differing implementations of KYC by cryptocurrency service providers.
Regardless, KYC is in place so that the money used to buy cryptocurrencies don’t come from illegal sources. This includes activities such as money laundering and terrorist financing. Additionally, KYC exists so that the cryptocurrency purchased by users can be tracked. Implementing KYC processes allows crypto services to gain a proper understanding of their clientele. It allows them to reject applicants with questionable backgrounds while monitoring client activities and managing risk.
Yes, KYC is required by law for banks, lenders, insurance providers and other financial institutions. It doesn’t matter how large the business is, KYC is required for any business dealing in monetary services. However, it’s only required by law for cryptocurrency exchanges that also deal with fiat currencies in addition to cryptocurrencies and tokens.
Due to this distinction, there are some exchanges that don’t require any KYC until the user wants to purchase digital assets with fiat. These exchanges allow users to deposit and trade crypto that they already own without completing any KYC. This distinction varies depending on where the exchange is incorporated, meaning some exchanges require KYC even just to trade crypto and not fiat.
Below is the guide to passing a Know Your Customer identity verification process. It contains the basic steps, what information is required, acceptable forms of ID, how to upload a selfie with screenshots to help illustrate the steps.
There is a variety of information required for passing a KYC process. You can save time by having it ready when starting the process. The most common requirements are listed below:
The first step to passing KYC is to register with the service. Find the “registration form” or “sign up” button on the desired platform and click it to begin. Then:
The next step is to submit the personal information required by the service. Depending on the platform, this may include your address. All platforms will require: name, country of residence and an ID. This step may require you to upload a scan of your chosen ID, or simply enter your ID number. Uploading a photo or scan of the ID is more often required than not.
If it wasn’t required to upload a photo or scan or the ID in step 2, it will be required now. A clear photo or scan of the ID with no glare or obstructed view is necessary. Also required is a copy of a utility bill or bank statement where the address and name matches the ID provided. This is to verify that you actually live at the address provided and aren’t in another country.
The final step required before becoming verified is submitting a selfie. This involves taking a photo of yourself with a full view of your face. You must be holding a piece of paper that has your name written on it and the current date. Some sites will provide a unique code that also must be written on the piece of paper. All information on the paper must be clear, and your full face can’t be obstructed by the paper.
This step is required to ensure that the person registering for the account matches the ID provided. Selfies are either manually checked against provided ID photos, or done with biometric AI. Once the selfie is uploaded users can submit their information and await KYC approval.
Passing KYC can be instantaneous depending on the platform. Some platforms have dedicated teams or AI in place to quickly check over and approve new clients’ KYC information. Other platforms pass users within the same day, while some take multiple days or weeks to approve users. In order to help ensure a quick processing and passing of KYC, be sure to provide correct information, clear photos of ID documents and a clear selfie. When all of the steps are done carefully, passing KYC should take no longer than one day.
The safety of undergoing KYC is dependent on the platform in question. KYC is a safe process assuming the company handling the documents has privacy and security policies in place to protect client information. As long as the site is trustworthy, there is no risk in providing personal information such as a driver’s license or passport.
However, there are scams out there which will try to use KYC as a guise in order to steal personal information. It’s important to remember that KYC requires visible documentation and can’t be completed over the phone. Any phone call asking for personal information related to KYC is a scam. Email phishing scams asking users to verify personal information are common too.
No, KYC isn’t exclusive to cryptocurrency exchanges. Its application to cryptocurrency is recent, KYC began in 1989 as an effort to prevent fraud, tax evasion, terrorism financing, money laundering and other financial crimes in traditional financial and non-financial infrastructures. Those infrastructures still require KYC for new clients.
There are exchanges that allow users to register an account and trade cryptocurrencies without KYC. Users must already own cryptocurrency and deposit it onto the site to begin trading. Purchasing crypto with fiat isn’t possible without undergoing KYC. Platforms that don’t require KYC to trade crypto assets will ask for personal information as soon as fiat is involved. Exchanges are starting to require users to do KYC regardless of whether fiat is involved. Be weary if you encounter any exchange that doesn’t require KYC yet is allowing you to deposit fiat, this is likely a scam.
Some exchanges don’t require KYC initially because there is no guarantee that the client registering will be using fiat currencies. These exchanges allow users to trade cryptocurrencies that are already owned. They only ask for KYC when the client goes to purchase or sell cryptocurrency for fiat.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.
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