// 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

Let agents act without letting them run wild.

Deterministic policy on every MCP tool call. Per-identity grants. Full audit log.

Currently onboarding teams running MCP in production.
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