At the recently concluded CoinGeek Conference Zurich 2021, Nouriel Roubini, leading economist and professor at New York University’s Stern School of Business, and Dr Craig Wright, inventor of Bitcoin, took to stage to share the importance of the rule of law for the future of digital currencies. As cryptocurrency becomes more mainstream, regulations such as Know Your Customer (KYC) measures are essential to creating healthy markets and benefits for the cryptocurrency market and regulators alike. 

As crypto exchanges and wallets grow to take on similar services as financial institutions, KYC has to be implemented in exchanges according to the different jurisdictions they operate in. This safeguards customer’s funds and information from potential hackers and reduces the loopholes that criminals seek to take advantage of. Effective KYC protects exchanges from interacting with individuals or organizations with malicious intent, at the same time, provides financial intermediaries with information to review regulations.


What is KYC?

Know Your Customer is the process businesses take on to verify the identity of their clients either before or during the time that they start doing business with them. Procedures are set in place to ensure that customers are not involved in corruption, bribery, or money laundering. Extensive customer due diligence is essential to protect businesses and their clients from unanticipated repercussions due to external breaches.


4 Key Elements of KYC

To better understand how Crypto Exchanges are utilising KYC it is important to understand that they can be classified into two groups.


Fiat to Crypto Exchanges

Fiat to Crypto Exchanges allow users to convert their fiat money to virtual currencies, for example, buying Bitcoin with USD. These exchanges are the checkpoints where new conventional fiat money enters the currency market. Transactions for the purchase of cryptocurrencies are fulfilled via wired transfers, credit cards, or other forms of payment. Some notable exchanges include Coinbase, Gemini, Bitstamp, Bitfinex, Bittrex, and Kraken.

These exchanges tend to be more proactive about compliance monitoring as their services involve fiat money. Gemini implemented compliance rules and regulations in order to “create healthy markets”, in accordance with the Bank Secrecy Act and associated anti-money laundering regulations.


Crypto to Crypto Exchanges

Crypto to Crypto Exchanges such as Orion Protocol, typically enable platform users to exchange one cryptocurrency for another. Orion Protocol supports popular virtual currency types and allows anonymous use of the platform. Regardless of whether users conduct large or small transactions, they need not undergo KYC.

Exchanges without withdrawal or deposit limits exist as well, users need not undergo KYC checks or go through the identification process before they start trading. Either group of crypto exchanges will have a customised KYC policy that they enforce at different stages. The KYC process helps protect and maintain the integrity of the financial system by dampening illicit transactions and improving wallet security. Furthermore, trust and transparency with clients are established with proper compliance measures.

KYC may still be relatively new in the crypto world, however, it is nevertheless still incredibly crucial to ensure a safe market. While that may be so, conventional KYC needs to be streamlined to tackle cost, onboarding friction, and data security issues. Automating with advanced solutions is one method to overcome issues arising from traditional KYC processes and satisfy the need for risk assessment. 

A robust compliance solution allows risk assessment to be automated and simplifies the risk reporting process. Regtank leverages our proprietary smart risk assessment engine to provide a 360° risk profile.


Contact us at for a demo!