KYC and AML in Crypto Explained: What Exchanges Require and Why

KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements apply to centralized crypto exchanges. Here is what they require, how to comply, and how DeFi operates differently.

Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance are required by law for any financial intermediary serving customers — including crypto exchanges. These requirements exist to prevent terrorist financing, tax evasion, and money laundering.

What KYC Requires

Why AML Matters for Crypto

Blockchain transactions are pseudonymous — traceable but not by default tied to identity. AML compliance requires exchanges to screen wallet addresses against sanctions lists (OFAC, UN), monitor for suspicious patterns (structuring, rapid fund movement), and report suspicious activity to financial intelligence units.

DeFi and Self-Custody: No KYC Required