Skip to content

GLOSSARY · BLOCKCHAIN & WEB3

KYC (Know Your Customer)

User identity verification process required by regulators.

WHAT IS IT? · FOR DUMMIES

KYC is like showing your ID, passport or a utility bill to prove who you are before using financial services, such as opening a bank account, buying cryptocurrency or accessing an investment platform.

It helps the company to know that you are a real person, to prevent fraud and to prevent someone from using the system for illegal activities.

Although it may seem annoying, it's a way to protect everyone and keep the system safe.

WHAT IS IT? · PRO

KYC (Know Your Customer) it is a mandatory procedure adopted by financial institutions, fintechs, cryptocurrency exchanges and other regulated service providers, whose purpose is verify the identity of your customers before allowing them to access financial products or services.

This process consists of collecting and validating the user's personal information, using official documents such as ID, passport, driver's license, as well as proof of residence (invoices, contracts) or even biometric technologies (facial recognition, fingerprint, etc.).

In the context of blockchain and cryptoassets, KYC has become an increasingly common practice even on decentralized platforms, allowing compatibility with regulatory frameworks without completely compromising user autonomy.

In addition, many jurisdictions require that KYC be an ongoing process, meaning that customer data must be updated regularly to ensure its validity and accuracy.

01 / Key points

  • Prevent the Money Laundering (AML).
  • Avoid the terrorist financing (CTF).
  • Protect against identity fraud or the use of fake accounts.
  • Comply with international regulatory standards such as the FATF, FinCEN and the EU, among others.
  • Build trust in traditional and digital financial markets.

02 / Advantages

  • Protects against illegal activities.
  • It facilitates integration with the traditional financial system.
  • It can improve user security.

03 / Disadvantages

  • Lower privacy.
  • Risk of data breaches.
  • Move away from the ideal of decentralization.

RELATED CONCEPTS

AML (Anti Money Laundering)

KEEP LEARNING

The regulatory challenges of blockchain in different countries What is the difference between regulated and unregulated tokenization? CNMV and tokenization: which companies can issue regulated tokens in Spain? 10 advantages of regulated tokenization compared to traditional tokenization in digital investment

RELATED SERVICES

Blockchain consulting for companies White label tokenization platform Real World Assets (RWA) Security Tokens (STO)

Full glossary

This entry is informative. It is not legal, tax or investment advice. The rules cited change: check the current version on BOE and EUR-Lex.