Explaining why crypto onramps require selfie and license

As more and more people are investing in cryptocurrency, regulation has evolved. From the first crypto license in Estonia in 2017 to the MiCA and VARA regulations in 2024, rules have become more stringent by the day. These rules are mainly targeting money laundering and terrorism financing. In other words: financial crime, as they are also targeted at insider trading, market manipulation and other types of frauds and scams. These regulations are often known as Anti-Money Laundering (AML).

In less than a decade, the world of crypto has gone from being the Wild West to being one of the most regulated industries.

In many jurisdictions, notably in Western countries such as the USA, United Kingdom and the European Union, strict rules have started to apply. Mimicking existing regulations of financial services industries and even banking, they grew to expect crypto businesses to collect more and more information about their clients. This includes identity verification through the submission of ID documents, driver’s license, and the process of using video or selfie verification to confirm that the person behind the account is indeed the one on the document. This process is known as the Know-Your-Customer (KYC) process. If the client is a company, we then speak about Know-Your-Business (KYB).

In this article, we explore possible solutions for both entrepreneurs and investors.

I want to create a non-KYC crypto onramp, where should I register my crypto company?

Compliance with AML and KYC laws is mandatory in most jurisdictions regulating crypto businesses. For example, the Markets in Crypto Assets (MiCA) regulation, applicable in all member states of the European Union, requires crypto businesses to collect a significant amount of data from their customers. Similarly, they should collect and communicate about transactions, as a measure to prevent financial crime.

Therefore, an entrepreneur willing to start and operate a no KYC crypto exchange to not be required to ask for personal details about customers should consider jurisdictions with lighter regulations, or jurisdictions allowing crypto activities without regulating them.

Registering a crypto company in a light-regulation jurisdiction

These jurisdictions are focusing on market efficiency. They may have KYC requirements, but their compliance laws are generally not too stringent.

Some of them do issue a full-fledged crypto license, which is a net positive for gaining the trust of customers and third-parties such as banking institutions. Some require basic registration, to declare to a governmental body that the company will offer crypto-related services. In both cases, compliance requirements may apply.

Want to know which jurisdictions offer light regulatory frameworks for crypto businesses? Ask one of our consultants.

Starting and operating a non KYC crypto exchange in an unregulated jurisdiction

A few offshore jurisdictions have neither laws nor rules that apply specifically to cryptocurrency businesses. They are considered as normal companies by the company registries. Such companies are then free to innovate in their business model, as well as pass on including compliance checks for their clients.

Such structures are also usually cheaper, given that they do not require licensing fees nor the preparation by a lawyer of specific documents.

Interested in starting an unregulated crypto business? Book a consultation with an expert!

I want to find a crypto onramp that doesn’t ask for a selfie and ID details, how to?

Finding the best no KYC crypto exchanges is difficult, as virtually all major exchanges require KYC. An individual willing to invest in crypto without having to undergo a KYC process and having their information collected by a third party has two ways to do so.

Finding a crypto onramp without KYC, registered in a low-regulation or unregulated country

Offshore crypto companies are subject to lower compliance requirements. Their goal is to attract investors, therefore they strive to be trustworthy and attractive. They may get an offshore license to fulfill this purpose, which will have them ensure that no financial crimes are committed with the help of their services.

Finding these platforms may not be easy, as they are unlikely to be the biggest and most popular.

Staying out of centralized third-parties with peer-to-peer transactions, self custody and DeFi

If you are not willing to use any platforms, whether registered in your country or offshore, it is still possible to acquire and hold cryptocurrency.

A peer-to-peer transaction is the oldest and simplest way to exchange something for another thing. Many platforms offer users the ability to advertise their willingness to purchase or sell cryptocurrency. The transaction then happens between the two linked individuals, who are free to negotiate the counterpart of the crypto transaction: cash, bank wire, something else entirely.

Not your keys, not your wallet. You do not need a crypto exchange to possess cryptocurrency. Self custody requires acknowledging that you take full responsibility of your funds: your seed phrase must stay secret and you must not lose it.

And to exchange a cryptocurrency for another one, there are multiple DeFi (decentralized finance) platforms and bridges (to move cryptocurrency from a blockchain to another one). Connecting your wallet to these protocols and using them might be daunting at first. It is always encouraged to read documentation and inform yourself properly before using third party protocols. Be careful to only sign trustworthy smart contracts and ensure you are OK with the transaction fees.

Whether you’re an entrepreneur seeking freedom to innovate in the crypto or an investor looking for privacy, navigating the complex world of crypto regulation requires informed decisions.

At LegalBison, we specialize in guiding entrepreneurs and businesses through these challenges. Let’s build your future in crypto together.