TRASTRA - why KYC is necessary

What is KYC in Crypto and How it Works


One of the main characteristics of cryptocurrencies is anonymity in transactions and users’ data.

These two features are not supported by banks and governments, thus all crypto activities are usually banned.

Due to the decentralized nature of the blockchain technology, it is not easy to know all the details of those that you get into business with.

This has brought up the debate that KYC may be an end to this feature of digital coins.

Others argue that it will bring transparency into transactions making it less risky to venture into cryptos.

What is Know Your Customer? (KYC)

KYC simply connotes for Know Your Customer.

It is always important to know the real identity of who you are dealing with in any kind of transaction so as it becomes a success.

Some banks have put this process into law in that it is a must for them to know the nature of business of those that walk into their premises.

This helps them in deciding with a very small error margin the risks involved in conducting business with that particular individual.

The financial crisis and financing of terrorism have led to heavy regulations imposed in the financial markets.

Therefore the introduction of KYC in the cryptocurrency field will increase the possibility of use and also widen its acceptance among the skeptical investors.

Some companies have actually integrated KYC in the industry.

For instance, Polymath integrated with IdentityMind – a platform offering anti-money laundering services to close this gap in the market.

So what is the procedure of the KYC process?

The AML compliance is to be adhered by financial institutions that want to undertake the activities without facing fines and other third-party responsibilities.

This was evident when a bank like the Deutsche Bank was issued with a fine of $630 million dollars by UK Financial Authority for making transfers of over $10 billion dollars from unknown origins in between the years 2012 to 2015.

Steps of the KYC process:

  • Customer acceptance policy: This is where the financial institutions investigate whether getting into business with the customer is of any benefit.
  • Customer Identification Procedure: This requires the financial institutions to collect and record personal details of the customer. The documents presented should contain the name of the customer, date of birth, address and identity card of the customer.
  • Customer due diligence: The financial institution should obtain information for verification of the customer’s identity to assess risk of getting into business with this customer. If any queries arise during this process the institution is allowed to undertake enhanced due diligence.
  • Transaction monitoring and management of risk. So as to come up with a complete profile in this point. The institution is expected to investigate and answer the following questions regarding the customer: What is the purpose of opening the account? What is the expected nature of using the account? (volume, regularity and also amounts) origin of funds to the and out of the account, the goodwill of the business among other areas that are vital to the business.

Upon collection of these details, the financial institution will be in a position to group the data of its customers according to:

  1. The type of customer
  2. The geographical location
  3. The nature of business undertaken by the customer
  4. The type of the account
  5. The average balance in the account
  6. The volume of transaction
  7. And many more segmentations.

This grouping of data of customers will help to easily identify any suspicious activity and the bank can easily contact the affected customer.

So why KYC matters to cryptocurrencies?

According to principles laid down in RBI and standards set in Prevention of Money Laundering Act, 2002 in management of activities termed as Anti Money Laundering (AML) and Countering the Terrorist Financing (CTF), every financial institution is expected to undertake the KYC controls and also screen the type of transactions the customers engage.

By institutions undertaking the KYC process, the crypto industry will benefit by:

Unlocking of regulations

Financial institutions across the globe have opted out of the cryptocurrency market since it does not follow the principles laid in the PMLA.

Big banks such as JP MORGAN, Bank of America, Citigroups among others have blocked customers in the cryptocurrency industry.

However, if parties involved into the KYC process, this might result in the banks to accept dealing them again.

Appreciation of the blockchain technology by a larger population

The transparency and ease of trace of funds in the blockchain are easy.

If the users are well known, then it will be hard for online hackers and fraudsters to have access to another customer’s funds.

This will lead to increased use of cryptos to conduct transactions hence reach a larger population.

Reduction of tax evasion

The ease of locating the movement of funds from one user to the other will reduce unscrupulous users evading tax as the movement of all funds can be easily traced from the source to where it is used.

Reduce loss of funds in the blockchain technology

Hackers and other online fraudsters will not easily hack into other users’ accounts as they can easily be traced and imposed on a heavy penalty, as anonymity of the users will be a thing of the past.


In conclusion, the advantages that the KYC process will bring into conducting transactions using cryptocurrencies will be of enormous benefit especially for the leaders in the market. Bitcoin transactions, as well as Ethereum transactions, will be easily traceable for the all the users.

This will mitigate financing of terror groups, money laundering as well as tax evasion.

TRASTRA team perceives KYC as the main procedure bringing our customers trustable and safe service of linking digital and fiat currencies together.

Thus, we are doing our best to make it as much easy, as comprehensible and fast process for everyone.



Hanna Petrova

TRASTRA Project Manager.

Business and Data Analyst with 3 years’ experience in financial structure and soft development.

Experienced in Risk Management, Business and Requirements Analysis.

Other Categories:

You may like this:

More articles with this theme

Updates post TRASTRA


TRASTRA blockchain banking for cashing out crypto asks for your attention to share the latest product updates. We definitely will

Read now