KYC is the process of identifying customers and verifying their details to comply with global regulations, including anti-money laundering and counter-terrorism financing laws. The overarching goal of the KYC process in crypto is to prevent individuals or companies from using the asset class to commit financial crimes.
Notabene does not specifically touch KYC. However, Wallet Identification is one part of the KYC process. When an originator customer intends to send a transaction over the Travel Rule threshold, our wallet identification widget checks to see if the beneficiary is a VASP or a non-custodial wallet. Additionally, Notabene’s Counterparty Wallet ID Plugin allows originator VASPs to perform non-custodial wallet ownership verification.
KYC is the process of one VASP identifying their customer and verifying their details to comply with global regulations before allowing them to utilize their platform. Travel Rule takes it a step further–requiring two VASPs that have already KYC’d their customers to exchange and store customer PII on transactions over a certain threshold.
KYC is not only safe but critical to secure crypto transactions. Without KYC, it’s impossible to verify the parties of a transaction and avoid fraudulent scams due to anonymity. While Notabene does not provide KYC directly, our Wallet ID widget executes an integral part of the KYC puzzle.
Anti-Money Laundering (AML) and Know Your Customer (KYC) are both important frameworks to combat the illegal practice of money laundering. AML is a complex framework of rules, regulations, and strategies to identify and prevent profit from illicit activities, while KYC feeds into the AML framework by ensuring that only those who are considered low risk by financial institutions can have access to a particular exchange or platform.
Know Your Customer (KYC) and Anti-Money Laundering (AML) enforcement are beneficial to both VASPs and their end-users. As opposed to fiat currency, virtual currency as an asset class have developing regulations, which some bad actors increasingly use to transmit and hide the source and destination of their financial transactions. Standardizing regulatory practices and performing KYC and AML checks on owners of blockchain wallets can help mitigate money laundering, terrorist financing, and illicit financing.