KYC (Know Your Customer)
In short: KYC (Know Your Customer) is the procedure a financial service uses to verify a client’s identity.
KYC (Know Your Customer) is the procedure a financial service uses to verify a client’s identity. It usually involves checking an official identity document, confirming that the person matches it, and sometimes confirming a home address.
Why it matters
Banks, payment firms, and many crypto exchanges run KYC to prevent fraud and money laundering, to stop accounts from being used by someone other than their owner, and to meet the rules that apply to them. On a centralized exchange, completing verification often unlocks features such as bank deposits or higher withdrawal limits. Decentralized exchanges usually do not run KYC, because users trade directly from their own wallets. The trade-off is privacy, since you hand personal data to the platform, so it is worth knowing how that data is stored and protected.
Example
A new user signs up on a crypto exchange and wants to deposit money from a bank account. The platform asks for a photo of a passport or ID card and a short selfie. An automated check compares the face with the document photo and looks for signs of forgery. Once the check passes, the account moves to a higher verification level and the extra features become available.