Cryptocurrency Exchanges: What are KYC, AML and CFT?

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As cryptocurrencies have become increasingly popular, more and more moves to regulate them have been introduced. Most of these regulations target cryptocurrency exchanges due to the vital role that they play in the cryptocurrency market.


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While there are many types of regulations that are being rolled out, the three that are definitely at the top of the list are KYC, AML, and CFT. Odds are you may have already heard about them – but what are they really all about?

“What is Know Your Customer (KYC)?”

Know Your Customer (KYC) regulations are designed to require that cryptocurrency exchanges verify the identity of their customers. The exact means through which that is accomplished can vary but normally involves gathering identification information such as full name, residential address, birth date, photo identification, bank statements, and so on.


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Although it may seem tedious, KYC regulations are actually very important. They can help to prevent numerous crimes such as money laundering, identity theft, bribery, corruption and terrorism. Simply put while they do remove the anonymity of cryptocurrencies, they give it greater legitimacy.

“What is Anti-Money Laundering (AML)?”

Anti-Money Laundering (AML) regulations are really fairly self-explanatory. It consists of various procedures and laws designed to ensure that people aren’t able to generate income through illegal and illicit transactions. Some of the main activities that AML regulations aim to stem include tax evasion, corruption, market manipulation, and the trade of illicit goods.

In short, AML regulations are mainly to keep bad actors from taking advantage of cryptocurrencies. It should be noted that technically KYC regulations are part and parcel of AML too, but they serve a more specific purpose.

“What is Combating the Financing of Terrorism (CFT)?”

Combating the Financing of Terrorism (CFT) regulations are quite straightforward as well. Broadly speaking they encompass various investigative procedures and laws to cut off the flow of funds to terrorists.

The reason CFT regulation compliance is important in cryptocurrency exchanges is because many terrorist organizations have been known to take advantage of cryptocurrencies. Due to the anonymity of cryptocurrencies it is difficult to identify transactions and connect them to individuals.

How Regulations Benefit Cryptocurrency Markets

Although the anonymity of cryptocurrencies was one of its selling points when the market was in its infancy, the fact of the matter is that it has become one of its main weaknesses. It has led to the misuse of cryptocurrencies for illegal activities, and affected its overalls security as well.

In the long term, the introduction of regulations such as AML, KYC, and CFT will increase the legitimacy of cryptocurrencies. It will also make cryptocurrency exchanges more reliable and guarantee that they are above board and are operating legally.

Of course AML, KYC, and CFT regulations vary greatly in different jurisdictions, which can lead to other issues as well. The level of implementation required for compliance can differ and some the standards in some jurisdictions may be far more relaxed than others.

Overall it is a step in the right direction however, and will make a Bitcoin trading platform more transparent.

Final Words

All in all AML, KYC and CFT are essential to make sure that cryptocurrency exchanges operate, and are used, in a legal manner. Over the last few years the regulation of cryptocurrencies has generally revolved around them due to the role that they play.

In the future these regulations are likely to continue to evolve and becoming more widely implemented. They could end up being a big factor that determines whether or not cryptocurrencies are able to become more mainstream as time goes by.



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