KYC

TL;DR KYC (Know Your Customer) comprises identity‑verification steps required by financial regulators and many crypto services. It originated in traditional finance in the late‑1980s, expanded to the crypto sector after 2014, and in TON it is applied to @Wallet purchases via a biometric check performed by Sumsub.

Overview of KYC#

KYC is a collection of measures designed to confirm the identity of customers. It supports anti‑money‑laundering (AML) and counter‑terrorism financing (CTF) efforts across banking, securities, and increasingly, cryptocurrency platforms.

Historical development#

Traditional finance

1989 – The Financial Action Task Force (FATF) was created, issuing recommendations for AML/KYC compliance.
1994 – The European Union adopted the Anti‑Money‑Laundering Directive (AMLD), setting common standards for member states.
2018 – The EU introduced the Fifth AML Directive (AMLD5), strengthening KYC requirements and extending them to crypto‑related services.

Crypto‑financial sector

2014 – The U.S. Securities and Exchange Commission (SEC) issued guidance requiring crypto exchanges to follow AML/CTF rules, prompting platforms like Coinbase and Gemini to implement KYC.
2017 – China banned initial coin offerings (ICOs), leading major Chinese exchanges such as Huobi to adopt KYC or cease operations.
2018 – Following AMLD5, European exchanges including Binance and Bitstamp began KYC onboarding.
2020 – Russia enacted a law on digital financial assets, requiring exchanges like LocalBitcoins to implement KYC.

Typical KYC workflow for crypto exchanges#

Customer identification – collection of personal data (name, birth date, address, contact).
Identity verification – submission of a passport, driver’s license, or similar document.
Address verification – proof of residence (utility bill, bank statement).
Risk analysis – the exchange assesses the client’s risk profile and decides on account approval.
Transaction monitoring – ongoing analysis of client transactions for suspicious activity.
Data storage – retention of client information for audit and regulatory purposes.

Exchanges may add steps such as two‑factor authentication or source‑of‑funds verification, depending on local regulations and internal policies.

KYC in the TON ecosystem#

@Wallet

TON’s official wallet, @Wallet, requires KYC for two specific actions:

Express cryptocurrency purchases – buying crypto instantly with a bank card.
Bank‑card purchases – acquiring crypto via card payment.

The KYC process consists of two steps:

Document verification – passport, driver’s license, or residence permit.
Liveness check – a biometric facial scan using the device camera to confirm the user is present.

Verification is performed by Sumsub, which typically completes the check in about one minute.

Non‑KYC alternatives

Non‑custodial wallets such as Tonkeeper and MyTonWallet, as well as decentralized platforms like DeDust and STON.fi, operate without mandatory KYC, offering full functionality for users who prefer privacy.

Impact and criticism#

KYC improves regulatory compliance, reduces the risk of financial penalties, and helps prevent money‑laundering and terrorist financing. However, the crypto community often criticizes KYC for eroding anonymity and privacy, especially when applied to centralized services like exchanges and on‑ramps.