White Label Cryptocurrency Exchange Software with Source Code for Spot and Futures Derivatives & Margin Trading

Most crypto exchanges require that new customers share their full legal name, government-issued ID, and up-to-date address information during onboarding, but this varies according to where the exchange operates and what services it provides. Our cutting-edge solution enables cryptocurrency exchanges to conduct a thorough global risk assessment by cross-referencing against more than 3000 sanctions and PEP lists spanning over 220 countries. By utilizing our AML Screening Service, businesses can seamlessly meet both global and local AML obligations, effectively safeguarding themselves from the specter of regulatory penalties. Peer-to-peer trading platforms work by enabling customers to trade cryptocurrencies between themselves. For customers to use these services, they need to have confidence and trust in the other users.

  • So we are ready to develop custom features covering specific product needs, like turnover count, user blocking logic, transaction processing, and thus save hugely on the compliance costs of the project.
  • This implies
    that various levels of AML controls should be used by exchanges depending on
    the risk level of the customer.
  • CFT came to prominence after September 11 (2001) and is so closely intertwined with AML efforts, the G20 watchdog the Financial Action Task Force (FATF) refers to its policy as AML/CFT, as covered by its 40+9 Recommendations.
  • They increased by 105% in 2021 compared to 2020, and regulators from the US, Asia Pacific and elsewhere have been exploring how to tighten controls and address this threat.
  • Another issue is when a crypto company files for bankruptcy protection and its documents become public as court records.
  • According to European Union regulations and Financial Action Task Force recommendations, Crypto exchanges have to perform customer account opening processes under AML and KYC requirements.

More recently, in February 2022, BlockFi Lending LLC (BlockFi) agreed to settle with the SEC for $100 million for failing to register the offers and sales of its retail crypto lending product. Further, FinCEN requires that money services businesses register with FinCEN and develop, implement, and maintain an AML compliance program. In the Anti-Money Laundering Act of 2020, Congress made explicit that businesses that exchange or transmit virtual currencies qualify as regulated entities.

Crypto-to-crypto exchanges

Today, the customer onboarding process is the first step to creating a good customer experience. Therefore, businesses aim for their customers to open accounts quickly, easily, and smoothly. However, companies must protect themselves from risks and fulfill their obligations in the customer onboarding process. According to European Union regulations and Financial Action Task Force recommendations, Crypto exchanges have to perform customer account opening processes under AML and KYC requirements. Fiat-to-crypto exchanges typically perform at least some level of KYC because they deal with fiat money. This forces them to conduct business with banks and other traditional financial institutions, most of whom conduct KYC procedures before doing business with any entities.

AML and KYC Solutions for Cryptocurrency Exchange

In the rapidly evolving world of cryptocurrency, staying ahead of financial risks is of paramount importance. Unlike the AMLD5, FinCEN’s Final Rule covers both crypto-to-crypto services and fiat-to-crypto services. It is also far more extensive, covering a whole remit of crypto businesses, such as crypto ATMs, mixers, dApps that sell coins, ICO issuers, mining pool operators, custodial wallets, and crypto payment processors. It is also important to note that this rule also includes peer-to-peer trading platforms like Localbitcoins, as well as stablecoins.

Deep Dive: Why AML/KYC Regulations Left Cryptocurrency Exchanges With A Difficult Choice

Anti-Money laundering consists of a set of procedures, laws and regulations that are created to put a stop on income generation through illegal activities. Some of those activities include tax evasion, market manipulation, public fund misappropriation, trade of illicit goods and other activities of such kind. Financial institutions have to continuously conduct due-diligence processes to detect and prevent the malicious activities. The cryptocurrency gambling sites are reported to be the most common tools for money laundering.

Know Your Customer procedures are for the business to recognize the person who will become the customer. If we talk about how this happens in general, the business collects customer data during customer account opening and checks the accuracy of this data. In this process, the accuracy of the data is as important as collecting the data.


We’ve learned from numerous sophisticated attack vectors that we’ve witnessed with other exchanges. Set up trading halts and curbs based on specific criteria to prevent flash crashes. Permit institutional traders to connect via FIX protocol, or enable Dark Pool trading. Our solution was designed to disrupt the industry and to provide our clients with a competitive advantage.

AML and KYC Solutions for Cryptocurrency Exchange

In the rest of the article, we will explain how virtual assets such as crypto exchanges should serve according to the European Union and FATF standards and the precautions to be taken. Virtual assets such as blockchain, bitcoin, crypto assets, and virtual currencies have the potential to change the economic environment radically. Virtual assets have many potential benefits, such as facilitating, speeding up, and cheapening payments. However, its features, such as speed, global reach, and anonymity, have become a new financial tool for those who want to escape regulators and supervisors. Therefore, virtual assets face the risk of being a tool for the financial transactions of criminals and terrorists.

Increase Customer Trust and Transparency

A website, «Celsius Networth,» even enabled visitors to enter names into a search bar and see where they ranked on a «leaderboard» of the biggest losers from the Celsius debacle. These procedures present law enforcement services using another and potentially efficient method to track and block terrorist routines. Funds that have unidentified or insufficient information about their origin serve as major red flags. A wallet linked with https://www.xcritical.com/ numerous credit cards, coins being transferred from mixing services, online gambling platforms, dark web marketplaces, etc. are all indicative of money laundering related activities. Used effectively, KYC can help financial institutions replace obsolete verification systems, perform a number of very beneficial services, such as screening and registering new users and ensure that high-profile transmittals are fully compliant.

If an assessment finds that a customer is high-risk, the crypto exchange should deploy more intensive compliance measures instead of simpler measures for low-risk customers. Risk-based compliance enables crypto exchanges to deploy their AML/CFT resources more efficiently while protecting customers from negative experiences as far as possible. KYC is part of AML, which also includes creating https://www.xcritical.com/blog/aml-crypto-how-do-aml-regulations-apply-to-exchanges/ and enabling policies, training, designated responsibilities and review procedures. Screening accounts against watchlists, monitoring transactions and deploying an adaptable risk-based approach to verification helps ensure an exchange is compliant with AML regulations. Behind the scenes, the crypto company uses an identity verification service to ensure the identity is legitimate.

What crypto asset services will be regulated under MiCA?

Please note that the Modulus exchange solution may not be used for converting digital assets into real currency or vice versa without proper licensing and regulatory oversight. The solution may also not be used for sports betting or gambling if not permitted in the jurisdictions where you plan to conduct business. Modulus provides geo-fencing functionality to prevent unauthorized users from accessing your exchange, if required. Digital asset exchanges must follow all rules with proper legal compliance, AML, and KYC in place for not only the jurisdiction in which the exchange is domiciled, but also for each jurisdiction in which it conducts business.

AML and KYC Solutions for Cryptocurrency Exchange