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6 Important Facts About KYC in Blockchain

Regulators worldwide have begun to expect the cryptocurrency industry to comply with some existing regulations — because crypto is a budding industry, not all old regulations can be applied — but there is also a lack of consumer protections which enable blockchain technology, in its ideal form, to be immutable.

Regulators are primarily concerned with the well-being of citizens, and when a network emerges which offers limited or no consumer protections, regulators may strive to enforce limitations on it in order to protect the average consumer from falling prey to less than legitimate projects.

Because cryptocurrencies can have varying levels of consumer privacy benefits, ranging from the pseudo-anonymity of bitcoin to the ring signature enforced anonymity of Monero, regulators are pushing for stronger KYC requirements when token sales are launched. Projects that fail to comply have been forced to issue refunds, cancel token sales, and have even faced legal recourse as a result.

Regulators are pushing for stronger KYC regulations to ensure funding for projects doesn’t come from illegitimate sources, for token sales without KYC offer an easier way for criminals to launder funds than say, a regulated foreign exchange market.

What is KYC?
KYC is an acronym that stands for “Know Your Customer”, a form of legislation that was implemented to ensure that funds can be traced back to any entity that has held them. Even though some projects issue tokens that are “fungible” or identical, businesses can still collect information about how they purchased their tokens.

The information about the person who purchased the tokens is needed to meet legal requirements for cashing the funds out at a bank, avoiding legislative pitfalls, and ensuring compliance from contributors.

In an effort to ensure that sensitive jurisdictions such as China and the U.S. are not an issue, some projects will require KYC verification, but will not allow citizens from those countries to participate at all.

What sorts of information are needed for KYC compliance?
The information required depends on the jurisdiction and the amount that an investor wants to contribute. For some countries, like the U.S., individuals can contribute a percentage of their total net worth to a security, whether they are an accredited investor or not. That project, however, can only accept a certain maximum amount of funds from non-accredited contributors.

Common documents required for KYC include:

  • Email Address
  • Country of Residence
  • Name (first and last legal name)
  • Birth Date
  • Phone Number
  • Photo of Passport/Driver’s License
  • Photo with Corresponding Passport
  • FATCA (U.S. Only)
  • Crypto wallet address (for whitelisting)
  • Investor Questionnaire
  • Etc.

  • All of the above documentation is used to pair a person to a record within government systems; this ensures that terrorist funding, money laundering, and tax evasion are much harder crimes to get away with.

    Why so much information?
    A large amount of information is required to make faking an identity more difficult. For smaller contributions, the required documentation is less, but so is the contribution maximum, on average. With less money changing hands, there is less need to extra verify a personal identity.

    All of the information is ultimately used to ensure that all funds being transferred are legal, whereas they may not be if no one is accountable for keeping record or reporting their assets.

    How can I undergo a KYC check to participate in a token sale?
    Token sales are running KYC checks more frequently now that the industry is beginning to mature, so it is important to be familiar with how they operate. KYC checks normally consist of visiting a web page, entering some personal information, and possibly taking a few screenshots, provided you are only contributing a small amount.

    If a larger contribution is on the table, investor questionnaires, FATCA documentation, KYC forms (an example form can be found here) along with the more basic information. All of the details have to be submitted prior to investment and approved before any funds can change hands.

    Alongside the personal information, token sales will ask for a contribution wallet address. Once the project has cleared the KYC check, they will associate a name to each contribution wallet on a whitelist, or list of verified contribution addresses.

    Who sees my information?
    The person looking at your information depends on the firm who is verifying the data. Sometimes, your information may be shipped halfway across the world. Other times, the project will be able to perform KYC checks in-house. It is vital that investors know who is checking their information, as well as what information is being provided.

    What about security?
    Projects who conduct KYC can assure their partners that they are low-risk because none of their funds came from illicit sources. Projects normally have protections in place, such as DDoS mitigation, penetration testing, 2FA hardening for the team, and more. It is imperative that participants inquire about security precautions before contributing.

    If they have low or no security, even the most honest team can lose funds to a hack just as quickly as a malefactor can run away with them.


    The DREAM platform isn’t just another untested beta program on a white paper… It’s live and being used right now to hire blockchain professionals. The token sale will enable DREAM’s innovative team to take DREAM to the next level by integrating A.I. and incorporating our platform token.

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6 Important Facts About KYC in Blockchain
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