KYC (Know Your Customer)
Definition
The identity verification process that regulated exchanges and virtual asset service providers (VASPs) are legally required to perform before allowing users to deposit or withdraw funds. KYC records are the primary mechanism for converting a pseudonymous address into a named individual.
- Applies to
- Regulated exchanges and virtual asset service providers (VASPs)
- Function
- Identity verification before deposit/withdrawal
- Investigative use
- Links a pseudonymous address to a named individual
- Legal basis
- Anti-money-laundering regulation
Common questions
How do investigators use KYC records once a wallet address is identified?+
After blockchain analysis narrows funds to an exchange deposit address, investigators subpoena the exchange's KYC file for that account, which can produce a name, government ID, and linked bank or payment details.
Why doesn't KYC solve tracing on its own?+
Funds routed through non-compliant exchanges, mixers, or peer-to-peer transfers never touch a KYC checkpoint, so tracing still depends on blockchain analysis to find where, if anywhere, the funds cross into a regulated on-ramp or off-ramp.
Related terms
- Address Clustering
- A technique that groups blockchain addresses likely controlled by the same entity. The most common method uses the common-input-ownership heuristic: all input...
- Blockchain Explorer
- A web interface or API that indexes a blockchain and allows queries by address, transaction hash, or block. Examples: Blockstream.info for Bitcoin,...
- Mixer / Tumbler
- A service that pools cryptocurrency from multiple users, exchanges it, and returns equivalent amounts to different addresses, intentionally breaking the transaction graph....
- UTXO (Unspent Transaction Output)
- The fundamental accounting unit of the Bitcoin protocol. Each transaction consumes previous UTXOs as inputs and creates new UTXOs as outputs. The...
- VASP (Virtual Asset Service Provider)
- The Financial Action Task Force (FATF) term for businesses that exchange, transfer, or custody cryptocurrency on behalf of customers. VASPs are subject...