Know Your Customer — identity verification required by regulated exchanges, involving government ID, selfie, and proof of address.
KYC (Know Your Customer) is the identity verification process that regulated cryptocurrency exchanges and financial service providers are legally required to perform on their users. KYC typically involves submitting: a government-issued photo ID (passport, driver's license), a selfie for facial recognition matching, and sometimes proof of address (utility bill, bank statement). The purpose is to prevent money laundering, terrorist financing, tax evasion, and other financial crimes. All major exchanges (Coinbase, Binance, Kraken) require KYC for fiat deposits, withdrawals, and in many cases all trading activity. KYC is controversial in the crypto community because it contradicts the ethos of financial privacy and pseudonymity that Bitcoin was designed to provide. Some users avoid KYC requirements by using decentralized exchanges (DEXs) which don't require identity verification. AML (Anti-Money Laundering) regulations are the legal framework that mandates KYC requirements.
Know Your Customer requirements in crypto mandate that exchanges and financial services verify user identities before granting access — typically through government ID upload, selfie verification, and proof of address. KYC exists to comply with anti-money laundering (AML) regulations and prevent terrorist financing. Most centralized exchanges (Coinbase, Binance, Kraken) require KYC before allowing trading or fiat deposits/withdrawals. The tension between KYC and crypto's permissionless ethos is significant: KYC creates barriers to access (excluding people without formal identification), privacy concerns (personal data stored on exchange servers can be breached), and jurisdictional restrictions (some countries' citizens are excluded entirely). DeFi protocols generally don't require KYC since users interact directly with smart contracts through self-custody wallets. However, regulatory pressure is increasing on DeFi as well — proposals for 'DeFi KYC' through wallet-level identity verification could fundamentally change the space.
To withdraw fiat currency from Coinbase, a user must complete KYC verification by uploading their passport, taking a live selfie, and providing their Social Security Number — a process that typically takes 1-3 business days for approval.
Yes — DeFi protocols (Uniswap, Aave, etc.) don't require KYC. You can interact with smart contracts directly from a self-custody wallet. However, converting between fiat and crypto typically requires a KYC-compliant exchange. Peer-to-peer platforms and crypto ATMs offer alternatives with varying KYC requirements depending on jurisdiction.