// GLOSSARY -- SECURITY & COMPLIANCE

What is KYC (Know Your Customer)?

1 min read Updated

Know Your Customer (KYC) is the regulatory process of verifying a user's identity before providing financial services — required by law in most jurisdictions for exchanges, on-ramps, and regulated crypto services.

WHY IT MATTERS

KYC is where crypto meets regulation. Centralized exchanges, fiat on-ramps, and regulated DeFi services must verify user identities — collecting ID documents, proof of address, and sometimes biometric data.

The tension: KYC is fundamentally at odds with crypto's permissionless ethos. DeFi protocols themselves are permissionless (no KYC for Uniswap), but the bridges to traditional finance (exchanges, banks) require it.

On-chain identity solutions (Worldcoin, Polygon ID) aim to provide KYC-equivalent verification without exposing personal data — using zero-knowledge proofs to prove 'I'm a verified human' without revealing who you are.

FREQUENTLY ASKED QUESTIONS

Do DeFi protocols require KYC?
Most don't — that's the point of permissionless finance. Some institutional DeFi protocols (Aave Arc) require KYC for regulatory compliance. The trend is toward optional KYC tiers.
Can KYC be done on-chain?
Emerging solutions use zero-knowledge proofs and verifiable credentials to attest identity properties without exposing personal data. Worldcoin, Polygon ID, and others are building this.
What information does KYC collect?
Typically: government-issued ID, proof of address, selfie/biometric verification, and source of funds declaration. Requirements vary by jurisdiction and service tier.

FURTHER READING

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