Do cryptocurrency wallets require real-name authentication?

Crypto wallet KYC requirements vary; large exchanges mandate it for compliance, while cold and decentralized wallets often don't, though interactions with regulated services might.

Feb 28, 2025 at 01:53 pm

• Hot wallets for large compliance platforms, such as Binance, Huobi, etc., usually require real-name authentication. Such platforms are subject to regulation and must comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. Through real-name authentication, the platform can verify user identity, reduce the risk of illegal activities such as money laundering and fraud, and ensure the security of the transaction environment.

• Small independent hot wallets, some do not require real-name authentication. They may be in a regulatory gray area, or there is no real-name threshold to attract users who pursue anonymity. However, when using such wallets, users need to be vigilant about their security and legality. Due to the lack of supervision, it is difficult to ensure the security of funds.

• Cold wallets generally do not require real-name authentication. Cold wallets are mainly used to store private keys offline, such as hardware wallets, paper wallets, etc. They do not rely on network connections. Users control their private keys themselves. They have little connection with third-party platforms and do not need to follow the platform's real-name requirements, which can better protect user privacy.

• If a cold wallet is purchased through a centralized exchange, or withdraws coins from the cold wallet through the exchange, the exchange may require KYC. This is the exchange's own compliance needs, not the cold wallet itself.

• Decentralized wallets are based on blockchain technology, emphasizing that users control their assets independently, and most of them do not require real-name authentication. When a user creates a wallet, he only generates the wallet address and private key, and does not need to provide personal identity information, which is in line with the concept of anonymity and decentralization of cryptocurrencies.

• Real-name authentication may be required when decentralized wallets interact with certain services or platforms that require compliance. For example, if the exchange is regulated, the user may be required to have a real name for compliance.

• Compliance needs : Many countries and regions have strengthened supervision of cryptocurrency transactions and require wallet service providers to implement real-name authentication. The Financial Crime Enforcement Network (FinCEN) requires virtual currency exchanges and wallet providers to comply with the "Know Your Customer" policy and users are required to provide identity information.

• Ensure transaction security : Real-name authentication can reduce false accounts and fraud, allowing regulators to track the flow of funds, reduce illegal activities, and protect the safety of users' funds. For example, after the platform reviews the user's identity, abnormal transactions can be discovered and blocked in a timely manner.

• Enhance trust : In the cryptocurrency market, users’ trust in the platform is crucial. Real-name authentication can improve the transparency and credibility of the platform, attract more investors, and promote the healthy development of the market.

• Legal risks : In some areas where cryptocurrency transactions are clearly required to be real-named, using a wallet to trade without real-name may violate local laws and face legal sanctions.

• Fund security risks : Anonymous wallets lack supervision and are easily used by criminals for illegal activities, such as money laundering, fraud, etc. Once a security breach occurs in a wallet service provider, it is difficult for user funds to be effectively protected.

• Transaction restrictions : Without real-name authentication, certain functions may not be able to be used, such as large-value transactions, fiat currency recharge and withdrawal, etc. Some platforms only offer specific services to real-name users to control risks.