KYC / AML
Know Your Customer / Anti-Money Laundering — identity verification and transaction monitoring required by regulated financial services.
KYC (Know Your Customer) requires financial institutions to verify the identity of their clients — collecting name, date of birth, address, and government ID. AML (Anti-Money Laundering) encompasses the broader set of controls designed to prevent the financial system from being used for money laundering or terrorist financing.
Regulated centralised exchanges are required to implement KYC/AML in most major jurisdictions. FATF (the Financial Action Task Force) has pushed for the 'Travel Rule' — which requires exchanges to share sender and recipient information for transactions above certain thresholds — to be applied to crypto as to traditional finance.
DeFi protocols have no central operator to enforce KYC, creating a regulatory grey area. Some protocols have deployed front-end geo-blocking, on-chain sanctions screening (using OFAC lists), or optional identity layers, while others remain fully permissionless.