KYC (Know-Your-Customer) is a popular and important term in the crypto space because of how it directly affects users. KYB (Know-Your-Business), although less popular, is just as important as KYC.

What is KYB in crypto?

Know Your Business (KYB) is a concept similar to Know Your Customer (KYC), but it specifically applies to businesses or corporate entities rather than individual customers. In the context of crypto, KYB involves collecting and verifying information about businesses that use cryptocurrency-related services or engage in transactions on crypto platforms.

Here's an extensive explanation of KYB in crypto:

1. Purpose: The primary purpose of KYB in crypto is to mitigate risks related to financial crimes such as money laundering, terrorist financing, and fraud. By verifying the identities of businesses, crypto service providers can ensure compliance with regulatory requirements and maintain the integrity of the financial system.

2. Information Collected: When businesses engage with crypto platforms or services, they may be required to provide various types of information for KYB purposes. This information typically includes:

- Legal entity name

- Business registration documents

- Tax identification number (TIN)

- Ownership structure (including beneficial owners)

- Proof of address for the business

- Nature of business activities

- Source of funds

3. Verification Process: Crypto service providers conduct due diligence checks to verify the accuracy of the information provided by businesses. This may involve reviewing official documents, conducting background checks on company executives, and cross-referencing information with government databases or third-party sources.

4. Compliance Requirements: KYB requirements for businesses in the crypto industry are often influenced by regulatory frameworks such as anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. Crypto businesses are typically required to adhere to these regulations to obtain operating licenses and maintain compliance with financial authorities.

5. Risk Management: Implementing KYB processes helps crypto service providers assess the risk associated with onboarding business customers. By understanding the nature of a business's activities and its ownership structure, crypto platforms can identify potential red flags and take appropriate measures to mitigate risk, such as enhanced due diligence or transaction monitoring.

6. Privacy and Data Security: While KYB involves collecting sensitive information about businesses, crypto service providers must also prioritize privacy and data security. They should implement robust data protection measures to safeguard the confidentiality and integrity of the information collected during the KYB process, ensuring compliance with data protection regulations such as GDPR (General Data Protection Regulation).

7. Ongoing Monitoring: KYB is not a one-time process; it requires ongoing monitoring of business relationships to detect and respond to any changes or updates that may affect the risk profile of the business. Crypto platforms may periodically review KYB information and request updates from businesses to ensure continued compliance.

In summary, KYB in crypto involves the collection, verification, and ongoing monitoring of information about businesses that use cryptocurrency-related services. It serves to mitigate financial crime risks, comply with regulatory requirements, and maintain the integrity of the crypto ecosystem.