Know Your Customer (KYC), or Know Your Client, are regulations imposed by governments and regulatory agencies on financial institutions and services providers, that require them to identify and verify their customer’s identities.

Centralized cryptocurrency exchanges (CEX) exchanges in the U.S. and some personal wallet providers, for example, require you to provide not only your email address, but also your full name, proof of your address, a phone number, and a social security number, which are then compared to a copy of a government-issued ID, such as a valid driver’s license or passport.

Some institutions go as far as asking for bank statements or utility bills to confirm different parts of your personally identifiable information (PII)

The purpose of requiring KYC information primarily revolves around complying with anti-money-laundering programs that have been required by banks and other traditional finance companies and institutions for years.

KYC regulation is meant to benefit not only the government imposing the regulations but also the businesses, institutions, and individuals getting involved in the cryptocurrency ecosystem.

KYC is meant to increase trust between customers and the businesses they are doing business with. Businesses want to be seen as being proactive and security conscious of who they let on the network.

KYC helps to reduce the legal risk for businesses, as confirming individual and business identities reduce the possibility of legal challenges and regulatory penalties.

KYC helps keep away bad actors who might engage in suspicious or illegal activity.

Opponents of KYC state that it takes away from one of the key features of cryptocurrencies – anonymity.