Whitelisted Withdrawals: The Next Step in Crypto KYC Evolution

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In Brief
  • Crypto KYC may soon involve the use of only “whitelisted addresses” for cryptocurrency withdrawals.

  • Crypto businesses are dealing with increasingly tougher government regulations.

  • Decentralized exchanges may become even more popular with their centralized counterparts hamstrung by stricter laws.

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With financial regulators demanding stricter compliance levels for crypto businesses, exchanges may soon only process withdrawals involving “whitelisted” addresses.



Where only a handful of platforms observed know your customer (KYC) verification, customer ID checks are now common on centralized exchanges. Indeed, the current crypto scene appears significantly changed from the “Wild West” era of times past.

KYC May Soon Include Whitelisted Addresses

Tweeting on Wednesday, Ari Paul, co-founder, and chief investment officer at blockchain asset management firm BlockTower Capital predicted that crypto exchanges will soon only allow withdrawals to approved addresses.



According to Paul, exchanges looking to operate within the law are currently developing modalities that will ultimately lead to this outcome.

In effect, exchange users will see their addresses slowly resemble real-name bank accounts. With addresses tied to specific entities, the pseudonymous aspect of cryptocurrency transactions will likely suffer a significant impact.

Regulated marketplaces may even maintain a registry of “blacklisted addresses” with protocols set up so that transactions involving these wallets raise immediate red-flags.

Another possible implication is the establishment of a “clean coins – dirty coins” dichotomy. Entities operating within the margins may also emerge, offering corridors via which market participants can courier funds across the divide.

While Paul’s conclusions are far from definitive, several changes within the regulated crypto space already support the BlockTower co-founder’s argument. In South Korea, for example, real-name crypto trading accounts are mandatory.

Platforms can lose their licenses if they flout this order. Commercial banks even verify the compliance of the platform to this rule before renewing banking services.

Stricter Crypto KYC Laws

As previously reported by BeInCrypto, BitMEX is the latest crypto trading platform to adopt strict KYC checks. The move marked a significant change from the company’s policies regarding customer identification and a further indication of the impact of tougher regulations in the cryptocurrency space.

Strict KYC compliance usually feeds into protocols aimed at combating money laundering. Indeed, it’s common to see anti-money laundering (AML) laws amended to include a country’s cryptocurrency industry.

Earlier in August, Ireland’s cabinet passed new AML laws with exchanges and wallet providers featuring prominently in the bill. In the U.K., the country’s Financial Conduct Authority recently expanded its financial crimes reporting requirement to include cryptocurrency businesses.

As these laws require even higher levels of compliance, trading activity may shift significantly towards decentralized exchange (DEX) platforms. Already, decentralized exchanges like Uniswap are seeing increasing volumes.


All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
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Osato is a reporter at BeInCrypto and Bitcoin believer based in Lagos, Nigeria. When not immersed in the daily happenings in the crypto scene, he can be found watching historical documentaries or trying to beat his Scrabble high score.

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