Understanding Crypto KYC in 2025: The Necessity for Digital Exchanges
In the rapidly evolving world of cryptocurrencies, ensuring compliance with Know Your Customer (KYC) regulations has become a critical aspect for businesses operating in this sector. Sumsub, a leading provider in identity verification solutions, has introduced a novel approach to simplify the KYC process – the Non-Doc Identity Verification service. This service allows users to verify their identities without the need for scanning documents, thereby speeding up the onboarding process.
Meanwhile, authorities across the globe are increasingly focusing on ensuring that KYC procedures are followed not just in traditional finance, but also in the metaverse. This is particularly true for the European Union (EU), the United States (US), the United Kingdom (UK), Singapore, and other countries where crypto businesses are required to comply with specific KYC requirements that vary by jurisdiction.
KYC Regulations Across Different Jurisdictions
European Union (EU)
Under the Markets in Crypto-Assets Regulation (MiCA), all crypto-asset service providers (CASPs) in the EU are required to perform KYC checks. These include verifying customer identities, conducting risk profiling, and monitoring transactions for Anti-Money Laundering (AML) compliance under the European AML directives (5AMLD/6AMLD).
United States (US)
The Financial Crimes Enforcement Network (FinCEN) mandates all Money Services Businesses (MSBs), including crypto exchanges and wallet providers, to comply with KYC obligations as part of the Bank Secrecy Act (BSA). This involves verifying customer identity, tracking suspicious activity, and reporting large transactions.
United Kingdom (UK)
Crypto firms in the UK must register with the Financial Conduct Authority (FCA) and comply with the UK Money Laundering Regulations. This involves appointing an AML officer, conducting customer due diligence (CDD), and implementing risk assessments. The FCA reviews applications case-by-case, expecting good governance and transparent operations.
Singapore
The Monetary Authority of Singapore (MAS) requires Virtual Asset Service Providers (VASPs) to register under the Payment Services Act and implement comprehensive KYC procedures, including identity verification, risk assessment, and ongoing monitoring. MAS Notice 626 outlines these AML/KYC obligations in detail.
Common KYC components across these jurisdictions include identity verification (ID documents), risk profiling based on customer type and jurisdiction, ongoing transaction monitoring, and enhanced due diligence for higher-risk customers such as politically exposed persons (PEPs) or those from high-risk countries.
The Importance of KYC Compliance
Compliance with KYC regulations is not just a legal obligation but also a crucial step in maintaining the integrity and credibility of the crypto industry. Failure to comply can lead to severe financial and reputational consequences, as evidenced by the £3.5 million fine imposed on CB Payments Limited, part of Coinbase, by the FCA for failure to comply with AML requirements.
Moreover, the Travel Rule, an obligation requiring the originating VASP to collect and verify data about the originator and beneficiary before sending this to the beneficiary VASP, is essential for VASPs to access crypto services and partially falls within the KYC procedure. Sumsub offers a Travel Rule compliance solution for VASPs, including features for identity verification, transaction monitoring, AML screening, and regulatory reporting.
In many countries, crypto businesses need to comply with AML and Countering the Financing of Terrorism (CFT) regulations by applying Customer Due Diligence (CDD) procedures, which include Know Your Customer (KYC) checks. The minimum information required during the onboarding process for KYC checks includes the client's full name, residential address, and date of birth.
The Future of KYC Compliance
As the crypto industry continues to evolve, so too do the challenges and opportunities associated with KYC compliance. Rapid advances in AI and deepfakes pose challenges in detecting fraud, but also offer opportunities for improving efficiency in this area. Public concerns regarding Non-Fungible Tokens (NFTs) and their environmental impact are leading to the adoption of energy-efficient consensus mechanisms and the potential for verification procedures to be more widely used to prove green credentials.
Tighter restrictions affecting crypto in jurisdictions around the world is a major theme in 2025, demonstrating how many countries are working hard to tackle the risks posed by non-compliance with regulations. A UK-led investigation revealed a $1 billion money laundering network that had allowed organized crime groups, drug dealers, and cybercriminals to convert illicit cash into cryptocurrency, emphasizing the need for a comprehensive approach to KYC compliance.
In conclusion, while the specific regulatory references differ – MiCA in the EU, BSA/FinCEN rules in the US, FCA guidance in the UK, and MAS regulations in Singapore – the importance of KYC/AML compliance remains undeniable. Sumsub's Non-Doc Identity Verification service and Travel Rule compliance solution are stepping stones towards a more efficient and compliant crypto industry.
[1] KYC Regulations by Jurisdiction
[2] The State of the Crypto Industry 2025 Report
[3] Sumsub's Non-Doc Identity Verification Service
[4] Sumsub's Travel Rule Compliance Solution
- Failure to comply with KYC regulations in the entertainment industry, such as streaming platforms accepting cryptocurrencies, could lead to severe financial and reputational consequences, similar to those experienced by CB Payments Limited.
- Technology advancements, such as AI and deepfakes, pose challenges in detecting fraud but offer opportunities for improving efficiency in the lifestyle sector, where KYC processes are commonly employed in digital transactions.
- As sports clubs and brands increasingly adopt cryptocurrencies for merchandise and fan engagement, they will also be expected to comply with KYC regulations in their finance departments.
- The education-and-self-development sector, particularly online learning platforms offering cryptocurrency courses, must also adhere to KYC regulations, ensuring that students providing funds comply with all applicable identity verification and risk assessment requirements.
