Glossary

Know your customer (KYC)

Know your customer refers to the identity verification that exchanges and brokers must perform before opening an account, which is how a wallet address becomes connected to a name and Social Security number.

How it works

Under the Bank Secrecy Act, exchanges and brokers verify identity before opening an account: name, address, date of birth, and government identification. Those records connect a customer to every deposit address and withdrawal address the account touches. The IRS obtains them through John Doe summonses and receives them indirectly through broker reporting on Form 1099-DA.

Why it matters

Anonymity on chain ends at the first KYC touchpoint, and most investors have several. Withdrawals from a KYC exchange to a private wallet link that wallet to the account holder.

Related: blockchain analytics, Bank Secrecy Act.

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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.

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