KYC, or Know Your Customer, is a process that crypto exchanges use to verify the identity of their users before allowing them to trade. The main role of KYC in crypto exchanges is to prevent illegal activities such as money laundering, fraud, and terrorist financing. Since cryptocurrencies operate in a decentralised and somewhat anonymous environment, regulatory bodies require exchanges to implement KYC procedures to ensure compliance with financial laws.

When a user signs up with a crypto exchange, the KYC process typically involves submitting personal information such as name, address, date of birth, and government-issued identification. In some cases, exchanges may also ask for proof of address or even a selfie for biometric verification. By collecting this data, exchanges can confirm that users are real individuals and monitor transactions more effectively.

KYC also plays an important role in building trust between exchanges and regulators. It allows exchanges to operate legally in multiple jurisdictions and reduces the risk of being shut down. For users, while KYC might feel like a privacy barrier, it adds security by making it harder for criminals to misuse platforms.

In short, KYC helps crypto exchanges create a safer, more transparent trading environment while meeting global compliance requirements.