Since Bitcoin’s launch in 2009, cryptocurrency (crypto) has dominated talks in finance, economics, and computer science.  With an all-time high of one Bitcoin equaling $109,026.02 on January 25th, 2025 and an overtime growth of over 100,000%, it’s no wonder that people are flocking to crypto investments.  

However, with great rewards comes great risks, and crypto is no exception.  As crypto exists in a digital space, it is subject to the potential of digital fraud.  Plus, crypto transactions often aren’t reversible, given its real-time value, and can be large transactions, making it attractive to online fraudsters.

Know Your Customer (KYC) regulations are used in the finance sector to ensure that companies verify customer identities and institute ongoing monitoring.  Traditional KYC measures can be easily adapted to combat identity theft and digital fraud in the crypto industry. 

Fraud in the Crypto Industry

According to Coindesk, crypto owners lost over $2 billion in hacks and scams in 2023.  While this is less than half the amount lost in 2022, it still doesn’t bode well for the crypto industry.  

Unlike bills or credit cards, crypto must exist in the digital space.  Users can store their crypto in a digital wallet.  These wallets can be online, on a physical computer, or exist on an external hard drive, and are tracked with a wallet address.  Some users decide to put their crypto in a neobank, or a bank that only operates online.  

If a user finds that the online platform where their currency is stored is no longer accessible or their digital wallet is stolen, there’s little that can be done to assist them.  Criminals have a plethora of options when it comes to getting their hands on crypto currency, including:

• Malware and hacking
• Phishing schemes
• Ponzi or pyramid schemes
• Fake wallet and neobank platforms

Benefits of Integrating KYC Regulations into the Crypto Sector

KYC in crypto helps limit illegal transactions, fraud, and money laundering and is easily translated from traditional to digital finance.  Customers, in this case, crypto buyers, are required to register for a brokerage platform or wallet with identifying information, like their name and address.  Usually, customers are also required to supply a government issued ID, like a driver’s license or passport.  If a user is deemed a risk, based on their onboarding information, the platform will regularly monitor their account for things such as suspicious transactions and activity. 

Some money transmitters, or companies that convert cryptocurrency to fiat currency, like the British pound, are registered as financial institutions.  Since these financial institutions must comply with anti-money laundering (AML) and customer due diligence (CDD) regulations, KYC can ensure their compliance.

KYC – Know Your Crypto (and How to Protect Against Scams)

Between Bitcoin’s steady growth over the last 16 years and new digital currencies popping up regularly, it’s easy to assume crypto isn’t going anywhere anytime soon.  With that in mind, here are a few tips to protect yourself when engaging in digital currencies:

• Research the cryptocurrency and any platforms used to purchase or store it thoroughly
• Be careful when purchasing or sending crypto; it can’t be undone
• Watch for opportunities that sound too good to be true
• Don’t spend more than you can afford to lose; crypto isn’t insured nor does it receive resolution rights

Know That You Can Crypto Safely with Integrity

Integrity, a division of Aristotle, is a leader in identity verification and KYC compliance.  We have a variety of solutions to protect you and your customers from digital currency fraud with customized validation services to meet your needs: 

• Integrity IDV-Direct: A web-based platform to verify the identity of online visitors across our database of 3.4 billion citizens across 135 countries allows you to quickly and efficiently. The platform is available through a single API allowing for an “integrate once, use anywhere” approach and is combined with several external gateways to deliver a best-of-class verification solution that leverages global data.  
• Integrity AML: Our Adverse Media and Negative News Monitoring solution empowers your organisation to stay ahead, protect your reputation, and enhance decision-making.  Integrity AML checks against SSN dead rolls, OFAC, DFAT, UK HM Treasury, DEA, LEIE, Interpol, and numbers of other global financial watch lists. Integrity also checks for Politically Exposed Persons (PEP) that may need to be tracked and provides a real-time flag and access to PEP information in the back office to determine true hits or false positives.
• Integrity Orchestration: Tie in all of Integrity’s solutions together into a waterfall approach of KYC and anti-fraud services. This orchestration layer enables a reactive identity infrastructure that layers affirmative KYC data with real-time fraud signals. It also allows for different workflows by country or by product through the use of individual site IDs which execute different business or compliance rules.

How can Integrity help you integrate KYC into your crypto space? Click the “FREE DEMO” button in the upper right corner and a representative will suggest the proper solution to meet your needs.