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Bybit Learn
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17 mars 2022

Know Your Customer (KYC)

Know Your Customer (KYC) is a process instituted by organizations or governing bodies to verify the identities of individuals wishing to conduct business with them.

What Does Know Your Customer (KYC) Mean?

Know Your Customer (KYC) means that an organization or governing body requests proof of identity before allowing an individual to conduct transactions with them. It’s a process by which organizations collect and verify the identities of their clients, and can screen them for any criminal activity.

The process usually requires a user to provide an official, government-sanctioned document to confirm their identity. Some examples of these documents include driver’s licenses, passports and ID cards. Regulations require financial institutions to collect customer data, in order to confirm that the person they're conducting business with is who they claim to be.

Why Is KYC Necessary?

Know Your Customer (KYC) laws and regulations are necessary to help banks, exchanges and other financial institutions comply with their legal obligations to prevent money laundering, fraud, and other criminal activity.

It also creates a verification process so that the institutions know who they’re doing business with, and whether or not those individuals can be trusted with their services.

What Does the Process Involve?

The Know Your Customer (KYC) process involves verifying that individuals’ identities by cross-referencing their information against governmental watch lists, such as the U.S. Office of Foreign Assets Control (OFAC). This can be done through a number of different types of technologies including photo ID checks, fingerprinting, facial recognition, and more.

The process will also ask for information about the individual’s identity, such as their name, date of birth, social security number, or national identification card/number. In some cases, this will be a one-time process. In other cases, it may include a biometric check or a continuous review of the customer against watch lists and sanctions programs.

How Does This Impact Crypto Investors?

In order to trade cryptocurrencies with many different exchanges, users have to go through Know Your Customer (KYC) protocols. The exchange will require investors to provide personal information and a photo ID to verify their identities before they can start buying and selling.

In most cases, compliance is required for all investors over a certain level of net worth or income.

These rules impact every cryptocurrency exchange and ICO worldwide, regardless of their location or the country they are operating in. This means that if you want to get involved in the world of cryptocurrencies there is a good chance you will need to submit KYC documentation to several different exchanges.