What is a KYC?
Quick Definition
KYC (Know Your Customer) is the process by which financial institutions verify the identity of their customers as part of regulatory compliance.
Full Definition
KYC involves collecting and verifying information about a customer's identity, typically including their name, address, date of birth, government-issued identification, and proof of address. Financial institutions use KYC to comply with regulations and help prevent fraud, financial crime, and the misuse of financial systems.
KYC has long been a standard requirement in traditional finance and now applies to most regulated digital asset businesses as well. Exchanges, stablecoin issuers, custodians, and other regulated service providers are generally required to verify the identity of their customers before providing certain services.
KYC in the stablecoin context
For stablecoins, KYC typically applies when users interact directly with the issuer, particularly when acquiring or redeeming tokens through the primary market. Peer-to-peer transfers on public blockchains generally do not require KYC because the issuer is not involved in those transactions. This approach allows regulated stablecoins to maintain compliant entry and exit points while preserving the open transferability of tokens once they are in circulation.
KYC and Steady
Qualified institutional investors who acquire or redeem STDY directly through Steady must complete KYC requirements. This is a regulatory requirement and a foundational part of operating a compliant stablecoin. The KYC process is designed to meet European standards and to support the kind of institutional onboarding our holders expect, thorough where it needs to be, efficient where it can be.
Once the STDY token is held in a wallet, peer-to-peer transactions and transfers happen independently of our control. If it's in a user's wallet, the user has full control over the STDY tokens.
Related Terms
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
Identity Layer
ReadAn identity layer is the system used to verify and manage the identities of users interacting with a protocol or financial service.
Redemption
ReadRedemption is the process of exchanging a stablecoin for its underlying value (typically fiat currency) directly with the issuer.
Redemption Infrastructure
ReadRedemption infrastructure refers to the systems, processes, and partners that enable holders to exchange their tokens for the underlying value.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
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