KYC and AML regulations for crypto exchanges in 2021

KYC and AML regulations for crypto exchanges in 2021

AML compliance solutions are getting immense recognition in all areas of the world. Sadly, the money laundering actions on an international scale have significantly intensified; consequently, there is a demand for a solution that can assist various industries of the world in fighting identity theft. As stated by the reports from UNODC 2-5% of the international GDP is used in malicious activities and money laundering. The amount is rising each day. Without any precautionary means, organizations have to experience penalties like they are acquiring presently.

Various countries are focusing on cryptocurrency to automate payment in the future. Europe has presently executed laws for reducing the anonymity of crypto wallets. This will assist in implementing virtual currency payment in the future. Therefore, imposters target crypto mainly for the phishing attacks and cyber fraud activities. As stated by the MIT Technology Review, imposters laundered USD 3.8 billion through bitcoin in 2020. This is why the financial action task force has also enforced strict regulations to fight money laundering. AML and KYC compliance is, hence, compulsory for all cryptocurrency exchanges. Let’s dive into the blog to find out what 2021 holds for cryptocurrency and what role should KYC and AML compliance play?

What is anti-money laundering compliance?

The anti-money laundering process is done for ongoing screening of users and continuous monitoring.  It’s mandatory to recognize and reduce monetary crimes such as terrorism financing. The ongoing screening is conducted against politically exposed people, sanction lists, and watchlists. Strict anti-money laundering is done by international regulatory bodies.

The 2021 Update for anti-money laundering compliance in crypto exchange

The prior year brought many problems and digital conversion was the greatest transformation and problem for various industries. Due to automation, digital currencies ought to become a significant choice for payments. Crypto is not limited to exchange only. Various parts of the world are assuming it for daily payments as well. As stated by the research paper from UOT Sydney, cryptocurrency accounts for USD seventy-six of illegitimate activities each year.

The 5AMLD was enforced in the initial of 2021 and by the end of 2020, the 6AMLD is all aimed to increase problems for cryptocurrency. Upcoming year, all virtual currency exchanges will be accompanying the sixth anti-money laundering directive for sure. Let’s take a closer look at both the directives and how the 6AMLD is more challenging for crypto exchanges.

Imposing KYC & AML Compliance At Crypto Market

The regulatory authorities have taken a number of measures to combat money laundering by acquiring crypto exchanges to conduct their KYC and AML in line with those of other financial institutions. The FinCEN, a government agency of the United States Department of the Treasury, declared in November 2019 that it would initiate stringently by implementing the “travel rule” for the crypto market. This law enforces exchanges to authenticate user’s travel identities as well as recognize any senders and receivers of the crypto market. It initially was registered in 2013 but was only intermittently imposed over the upcoming 6 years, allowing various crypto transactions to resume their traditional know your customer- fewer practices with an exception.

The United States government managed to reduce crypto transactions unconcerned with AML compliance in the same year, following the standard established by other monetary regulatory exchanges around the world. The financial action task force charged the owner exchange with attacking the BSA by declining to register more than 150 payments that were almost about $10,000, all of which acquired a payment transaction report to be transferred to the treasury.

Crypto exchanges are hence taking their AML/KYC compliance more strictly and are even doing business with 3rd parties to assist in combating imposters and criminals. Exchanges striving to give a seamless user experience and avoid penalties from the government would do well to comply with this example.


Crypto is likely to be largely used as a mechanism of payment in the upcoming year. Therefore, the increasing number of malicious activities, such as phishing, money laundering, identity theft is becoming a hindrance. To fight these frauds, a financial action task force has enforced regulations on all virtual currency exchanges. In October 2020, the 6AMLD took place as the 5AMLD. The most advanced directive is more stringent when it comes to money laundering in the crypto market. The fines have risen and KYC/AML compliance should be more intelligent. Therefore, AML compliance is vital for cryptocurrency.

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