CipherTrace has revealed that 56% of crypto exchanges fail know-your-customer requirements. The firm examined more than 800 platforms—including centralized exchanges, decentralized operations, and aut
CipherTrace has revealed that 56% of crypto exchanges fail know-your-customer requirements. The firm examined more than 800 platforms—including centralized exchanges, decentralized operations, and automated market makers—and found that over half maintain either weak or nonexistent ID verification systems.
The compliance failures cluster in Europe and the United States. In Europe, two-thirds of virtual asset service providers show inadequate KYC practices. Russia, the UK, and the US account for the highest concentration of non-compliant exchanges when measured by country.
Many of these exchanges hide their origins. CipherTrace found that 85% of exchanges running weak KYC frameworks don't disclose their country of origin in their terms and conditions. The pattern suggests these omissions are intentional—a strategy to operate outside anti-money laundering regulations.
Seychelles figures in the study with particular significance. Among crypto firms registered on the island, 70% maintain weak KYC standards. The jurisdiction carries a longstanding reputation for facilitating money laundering.
The regulatory focus extends to decentralized finance. Valerie Szczepanik, the SEC's lead on crypto issues, stated the position early this month: "These are all financial activities and they are likely subject to various laws already, including securities law, potentially banking and lending laws—definitely AML/CTF laws."
DeFi projects resist this framing. Dave Jevans, head of CipherTrace, has observed their reluctance up close. "From what we have experienced over the last couple of months is that they don't want to have anything to do with KYC," Jevans said. He expects that compliance will become unavoidable, regardless of their current stance.
