KYC, AML & Compliance

KYC (Know Your Customer) requires identity verification. AML (Anti-Money Laundering) requires monitoring transactions for suspicious activity. Both are mandated by financial regulators globally. The Travel Rule now applies to crypto: transfers above thresholds require sharing sender/recipient information between institutions.

Compliance costs are substantial, major exchanges spend hundreds of millions annually on compliance teams and monitoring systems. This creates barriers favoring established players. For DeFi, compliance is even more complex: truly decentralized protocols may not have a legal entity to regulate.

For individual users: complete KYC honestly, keep records of all transactions, be aware that transfers between unverified wallets and exchanges may trigger scrutiny. While DeFi protocols are permissionless, the on-ramps and off-ramps (converting to/from fiat) involve regulated entities with compliance requirements.

Privacy and compliance are often in tension. Understanding this dynamic helps you make informed choices about platforms and tools. The evolving regulatory environment means what's acceptable today may change, staying informed is essential for navigating crypto safely and legally.