What is KYC

KYC (Know Your Customer) — an identity verification procedure required by most centralized exchanges. Includes document verification, address confirmation, and sometimes proof of funds source.

Why KYC is Needed

For Exchanges

  • Regulatory compliance
  • Anti-money laundering (AML)
  • Counter-terrorism financing
  • Fraud prevention

For Users

  • Access to full functionality
  • Higher operation limits
  • Fiat operations capability
  • Account recovery

Verification Levels

Basic Level (Tier 1)

Required:
├── Email
├── Phone number
└── Basic data (name, birth date)

Provides:
├── Limited limits
├── Crypto-only operations
└── Usually up to $2,000-10,000/day

Advanced Level (Tier 2)

Required:
├── Document (passport/license)
├── Selfie with document
└── Address verification

Provides:
├── Increased limits
├── Fiat operations
└── Usually up to $50,000-100,000/day

Full Verification (Tier 3)

Required:
├── All documents
├── Source of funds
└── Possibly video call

Provides:
├── Maximum limits
├── VIP service
└── Institutional features

KYC Across Exchanges

Exchange No KYC Basic KYC Full KYC
Binance No Up to 20 BTC/day Unlimited
Coinbase No Required —
Kraken Up to $1,000 Up to $500,000/mo Unlimited
KuCoin Up to 5 BTC Up to 200 BTC Unlimited

Required Documents

Identity Documents

  • International passport
  • National ID
  • Driver's license
  • ID card

Address Verification

  • Utility bills (up to 3 months old)
  • Bank statement
  • Tax notice
  • Registration document

Additional

  • Source of income
  • Declaration of funds origin
  • Tax certificate

KYC Process

1. Document upload
   ├── Clear photo
   ├── All corners visible
   └── Not expired

2. Selfie with document
   ├── Full face visible
   ├── Document readable
   └── Date may be required

3. Address verification
   ├── Matches document
   └── Current document

4. Automatic verification
   ├── Usually 5-30 minutes
   └── Sometimes up to 24-48 hours

5. Manual review (if needed)
   └── Up to several days

KYC Risks and Concerns

Data Leaks

Known leaks:
├── Ledger (2020): emails, addresses
├── GateHub (2019): documents
└── Various exchanges: regularly

How to Minimize Risks

  1. Use verified exchanges
  2. Don't store documents in cloud
  3. Use unique email
  4. Enable all security levels
  5. Monitor leak news

Non-KYC Alternatives

DEX Exchanges

Decentralized exchanges don't require KYC:

  • Uniswap
  • SushiSwap
  • PancakeSwap
  • dYdX

DEX Limitations

  • No fiat operations
  • Crypto-to-crypto only
  • Network fees (gas)
  • Less liquidity for rare pairs

P2P Platforms

  • LocalBitcoins
  • Paxful
  • Bisq (fully decentralized)

KYC and DCA Strategy

For DCA, verification is usually necessary:

Why Complete KYC

Benefits:
├── Automatic purchases
├── Bank transfers
├── Lower fees
├── Account protection
└── Recovery possibility

Risk Minimization Strategy

1. Choose 1-2 reliable exchanges
2. Complete KYC only there
3. Use for DCA
4. Withdraw to personal wallet
5. Don't store excess on exchange

KYC and Taxes

What Tax Authorities Know

  • Exchanges report to regulators
  • CRS exchange between countries
  • Blockchain is transparent

Recommendations

  1. Keep trade records
  2. Save history
  3. Consult a specialist
  4. File according to law

Common KYC Problems

Problem Solution
Document rejected Better quality photo
Address mismatch Update registration or use different document
Long verification Contact support
Country not supported Use different exchange or DEX

Important: KYC is the reality of modern crypto industry. For comfortable DCA, it's easier to complete verification once on a reliable exchange than constantly look for workarounds. Choose exchanges with good data security reputation.