Why is KYC/AML required?
Starting in 2024, Brave is moving away from requiring KYC/AML, but here’s why it has been necessary and why it’s still required by partners like Uphold and ZebPay.
Simply put, KYC (Know Your Customer) and AML (Anti-Money Laundering) are mandated by governments to prevent illegal activities like money laundering and terrorism financing. Not complying with these regulations can lead to severe penalties, including fines and imprisonment.
Here’s some information to help you understand the legal background:
United States:
- USA PATRIOT Act: https://www.fincen.gov/resources/statutes-regulations/usa-patriot-act
- Cryptocurrency Regulation: https://www.innreg.com/blog/fincen-cryptocurrency-regulation-foundations-four-key-msb
European Union:
- KYC Requirements: https://www.mobbeel.com/en/blog/kyc-mandatory-2024-wallets-exchanges-cryptocurrencies/
- EU Crypto Rules: https://www.protocol.com/fintech/eu-crypto-kyc
- Crypto and AML: https://decrypt.co/104110/eu-crypto-anti-money-laundering-rules-private-wallets
World Economic Forum:
- Why Crypto Needs AML: https://www.weforum.org/agenda/2022/09/why-crypto-businesses-need-anti-money-laundering-regulations/
Governments worldwide enforce these regulations to combat crime, and failing to comply can lead to serious consequences:
- Example of penalties: https://www.justice.gov/usao-sdny/pr/high-ranking-employee-cryptocurrency-exchange-pleads-guilty-bank-secrecy-act-violations
- More on regulations: https://www.cftc.gov/PressRoom/PressReleases/8412-21
Future of BAT Payouts
Brave is exploring options for on-chain BAT payouts, possibly on Solana, as part of a project called “Boomerang.” If successful, this could eliminate the need for custodial partners and KYC/AML requirements. Stay tuned for updates as they work through the legal details. You can see any status updates in a topic at PSA: Current and upcoming changes to Rewards and Creators