What is KYC?
KYC (know your customer) is the process of verifying a client's identity — who they are, where they live and, in extended forms, the source of their funds — before allowing them to open an account, invest or transact.
Also known as: know your customer · identity verification · investor onboarding
In plain terms
KYC is the paperwork that proves you are who you say you are: ID documents, proof of address, sometimes selfies or source-of-funds explanations.
Financial institutions and token issuers must do it by law, so passing KYC is normally the first step to investing in any regulated or compliant offering.
How it works
The client submits identity documents and personal data; the provider checks them against government databases, sanctions lists and politically exposed person (PEP) lists.
Extended KYC adds questions about occupation, wealth origin and expected activity, which feed the risk rating used for AML monitoring.
Verification is repeated or refreshed periodically, and changes — new address, new PEP status — can trigger re-review.
Example
Hypothetical: an investor subscribing to a tokenized fund uploads a passport and a utility bill, completes a short questionnaire about income sources, and is approved within a day. Their wallet is then whitelisted in the fund's permissioned token, allowing transfers.
Why it matters for founders and investors
KYC is the gatekeeper of compliant investing: without it, an issuer cannot legally accept most investors, and permissioned tokens will reject the wallet outright.
For investors, completing KYC once with a provider usually speeds up every subsequent investment with the same ecosystem.
Common misconceptions
KYC is not just a formality: submitting false information is a legal offense in most jurisdictions, and mismatches discovered later can freeze investments.
Passing KYC with one provider does not transfer to another automatically; each regulated entity runs its own process, though some reuse verified data with consent.
Frequently asked questions
What documents do I need for KYC?
Typically a government-issued ID, proof of address dated recently, and depending on the provider, bank references or source-of-funds documentation. Corporate investors need formation documents and beneficial ownership information.
How long does KYC take?
Individual verifications often complete within hours to a few days with automated providers. Corporate structures, trusts and higher-risk profiles take longer because they require deeper review.