I just realized something quite interesting about today’s crypto market. People often talk about what KYC is and why it’s so important, but most only understand it as an annoying procedure that exchanges force on users. In reality, it goes much deeper than that.

So what’s the root of the problem? The crypto market originally emerged with ideals of privacy and cross-border transactions. But as the industry developed, it also became a playground for bad actors. In 2023, the transaction value from illegal addresses reached $24.2 billion. Money laundering, scams, and even terrorist financing—these issues have pushed lawmakers to take action.

That’s why “what is KYC?” has become a question everyone needs to understand clearly. It’s not just simple identity verification—it’s a tool for screening and controlling risk. Since 2020, when FinCEN required exchanges to comply with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations, the rate of illegal transactions has fallen from 1.9% to 0.43%. This figure says a lot.

I see three main benefits of KYC. First, it increases trust between users and exchanges. When people know the verification process is carried out strictly, they feel more at ease when depositing funds. Second, it significantly reduces crime. In 2023, revenue from crypto fraud decreased by 29.2%, and revenue from hacks decreased by 54.3%. Third, it helps stabilize the market.

You know, the crypto market is incredibly volatile because too many tokens are pumped and dumped through anonymous transactions. When exchanges comply with KYC, identity verification becomes easier, bad actors can be filtered out, and a safer trading environment is created.

As for the actual KYC process, it’s usually divided into three levels: intermediate, advanced, and professional. Each level has different requirements depending on the region. In general, you need to provide valid government-issued identification, complete facial verification, and checks against databases of high-risk individuals. If you want to raise withdrawal or deposit limits, you must declare the source of your assets.

Even now, there may still be non-custodial wallets that don’t require KYC, but the direction is clear: every country is refining laws to require all holders of crypto assets to make declarations. The United States has been leading the way.

To me, KYC isn’t a burden—it’s protection. It not only helps exchanges comply with the law, but also protects us from fraudulent activities. By implementing strict KYC, exchanges don’t just maintain a safer platform; they also contribute to the sustainable development of the entire industry. Especially in developing markets like Vietnam, this becomes more essential than ever.