What is KYC and how does it work?

Maciej Zieliński

13 Apr 2022
What is KYC and how does it work?

KYC, the “Know Your Customer” rule, is a common method of user verification in connection with the start of said users use of financial services. KYC is the norm in cryptocurrencies and financial law, as professionals are required to make every effort to verify the identity, relevance and risk of maintaining business relationships with the customer. These procedures are also a measure for AML analysis, which is taking action which aim to prevent money laundering. How does KYC work? In which countries must NFT projects implement the KYC procedure? What does it require of us? We're writing about this below.

How does KYC work?

KYC processes are also used by various economic operators to ensure that their customers, agents or consultants are checked before they are given access to any financial resources. The “Know Your Client” principle (KYC) is a mandatory requirement for entities which deal with securities, bank accounts, etc.

What is included in KYC

The purpose of the provisions set out by the KYC is to prevent criminals from using businesses for money laundering and commiting other financial crimes. By linking KYC and AML, many companies understand their customers better and have the opportunity to verify the capital and payments they receive. This helps them manage risk responsibly and professionally. In principle, institutions formulate their KYC policies on the basis of the following four key elements:

  • Customer Acceptance Policy
  • Customer Identification Procedures,
  • Monitoring of Transactions,
  • Risk Management.

The financial law environment is quite rigorous and makes KYC a mandatory and key procedure for financial institutions and others, as KYC minimizes the risk of fraud by identifying suspicious information at the initial stage of account creation. The KYC policy defines a client as follows. A customer is:

  • the person or entity that holds the account or is in a business relationship with the reporting entity;
  • the person on whose behalf the account is held,
  • the beneficiary of transactions carried out by professional intermediaries, such as exchange brokers, auditors or legal advisers,
  • any person or entity associated with a financial transaction that may pose a significant reputational risk or other risk to a bank, i.e. a person performing a bank transfer or issuing a “trust” on a high-value request as a single transaction.


In NFT, KYC is an element that is dependent on a given country’s policies, but also on what type of NFT will be used. Each State decides on its own whether the creation of NFT requires implementation of KYC procedures. Below we present the most popular places in the world of cryptography, which we have systematized by legislation.

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KYC and cryptocurrencies

Cryptocurrencies are seen as decentralized and anonymous funds. However, these benefits are also a challenge in preventing money laundering, as criminals see cryptocurrencies as an ideal means of using illegal capital. As a result, many financial institutions are looking for ways to impose KYC on cryptocurrency markets, requiring cryptocurrency platforms to verify their clients. Currently, most of the entities have implemented or are implementing KYC into their services. Exchanges are classified in accounting terms as “crypto-to-crypto” or “fiat-to-crypto”. As crypto-crypto exchanges do not deal with traditional currency, they do not feel the same pressure to apply KYC standards as stock exchanges which store traditional currency of any sort. If stock exchanges have a traditional currency in their offer, they are more pressured by states to implement the KYC rule. Countries which show great interest in NFT have already regulated this area. The United Arab Emirates, Estonia, Switzerland and the United Kingdom are places worth familiarizing yourself with if you want to start your NFT journey.

Dubai and NFT

At present, crypto assets in the United Arab Emirates have not been classified for their purpose, which could help to determine the law in this respect. Instead, the United Arab Emirates recognizes that it is necessary to specify how cryptocurrencies or NFT are actually used. For example, a crypto resource can be used as a token of use (in this case it will not be regulated as a financial product and it is probably not necessary to implement KYC), but with an awareness of its popularity it is considered to be traded for the purpose of making an investment. If, according to the country, the NFT is seen as a means of investment, it is an investment product, then it will be treated as a financial product, resulting in its regulation using the provisions regarding UAE securities (in this case, KYC needs to be implemented in the project). In Dubai and the United Arab Emirates, there is no single law which regulates NFT. Any use of NFT is analyzed in terms of its actual use. Although Abu Dhabi Global market (ADGM) as a free financial zone regulated the use of crypto assets as virtual assets, NFT does not fall within this definition. According to this law, “the virtual resource is not produced or guaranteed by any jurisdiction”. In summary, it should be pointed out that NFT is subject to KYC only if it is practically treated as an investment project. NFT is not subject to KYC if it is treated as a token of use only.

NFT and KYC in Estonia

Until 2020, it appeared that cryptocurrencies can enjoy freedom in Estonia in terms of legal regulation. This country has become the ideal place for businesses and business professionals who wanted to legally run a business based on blockchain technology and cryptocurrencies. The license issued by Estonia also provides the possibility to provide services throughout the EU. Do you need to obtain a license to implement your NFT project in Estonia? As a general rule, not until 2020! This was due to the fact that licenses were mandatory for virtual currency service providers. The law in this case describes virtual currencies as payment-based instruments such as Ether (ETH), Bitcoin (BTC), USDT and others.
According to case-law, the NFT did not cover the definition of virtual currencies, since each NFT provides a unique, limited or documented resource that allows for the use of specific items such as digital art. NFT is treated more as a property right, rather than a means of payment. That was the case in the past, but the 2020 amendment on the legislation
regarding anti-money laundering put all entities connected with NFT, ICO and decentralized exchanges into one group. Since then, KYC is a mandatory component in the implementation of NFT projects.

Switzerland – NFT are not securities

The situation in Switzerland is similar to that in the United Arab Emirates. When NFT is used as a means of payment and can be transferred or reinvested, the regulatory authority is required to implement KYC and AML procedures. If the NFT does not belong to the securities category and serves only as a guarantee of the “right of access” to the service or digital arts, there is no mandatory obligation to implement KYC and AML procedures. However, if the NFT can in any way be used as an investment, it is subject to the definition of securities.

Great Britain – mandatory compliance with KYC standards

In the UK, the procedural requirements determining whether the creation of a NFT project requires the implementation of the KYC and AML regulations were created by the RUSI (Royal United Services Institute), the UK's defense and security think tank. The institution itself was created in 1831 and is intended to ensure the security and efficient operation of the country’s finances. According to RUSI, NFT products:

  • help guarantee an ownership record of any item by means of a digital element,
  • give creators the ability to obtain royalties from copyrights,
  • are mainly purchased using cryptocurrencies.

Unfortunately, RUSI points to the risks associated with NFT, which it defines as follows:

  • NFT is purchased using cryptocurrencies, which are often used to commit financial crimes or for money laundering.
  • There is a risk of hacking attacks on accounts of users who own NFT.
  • As such, RUSI identifies NFT as a product that requires both KYC and AML procedures to be implemented and followed.


With KYC, we gain the ability to collect and analyze a lot of customer information. This helps protect them from financial crime and facilitates the exchange of information between companies and users. In addition, KYC is an aid to AML, as at an early stage it can identify an entity that is likely to be criminogenic. As countries are increasingly concerned about the bureaucracy and regulation of each sector, KYC is an element that everyone will need to familiarize themselves with sooner or later. Let us remember that NFT may have different applications, from collectors' products to gaming, or property rights to invest. Depending on their use, as well as the geographical and legislative elements, different provisions will apply. At the same time, we stress that it is useful to consult a professional legal adviser to help you comply with applicable laws before any actions connected with KYC, AML, or NFT are taken. This article does not constitute legal advice.

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What is Account Abstraction?


10 Nov 2023
What is Account Abstraction?

Account abstraction is a new way of thinking about how users interact with blockchains. Instead of using traditional externally owned accounts (EOAs), account abstraction allows users to create and manage their accounts using smart contracts. This has a number of potential benefits, including improved security, enhanced privacy, and increased flexibility.

What is account abstraction?

Account abstraction is a concept that, at its core, aims to simplify the user's interaction with blockchain networks. It is a transformative approach that seeks to mask the technicalities of blockchain operations from end-users. It is making transactions as straightforward as sending an email. Account Abstr. allows users to interact with the blockchain without worrying about the underlying technical details.

How does account abstraction differ from the traditional model?

In the traditional account model, each user has an EOA. EOAs are controlled by private keys, which must be kept secret in order to protect the user's funds. Acc. abstraction allows users to create and manage their accounts using smart contracts.

Historical Context

The journey towards acc. abstraction began with the first generation of blockchain technologies, characterized by their "one-size-fits-all" approach to account management. Bitcoin, for instance, introduced the concept of accounts and transactions in a form that was accessible to tech-savvy individuals but remained perplexing to the layperson. Ethereum expanded on this by introducing smart contracts, which opened the door to programmable transactions but did not alter the fundamental account structure. The idea of acc. abstraction has been discussed in the Ethereum community for several years as a part of various Ethereum Improvement Proposals (EIPs), particularly as a feature to be potentially implemented in Ethereum 2.0. It is a direct response to the need for a more versatile and user-centric design that can cater to a broader audience and spur the widespread adoption of blockchain technology.

The Technicalities of Account Abstraction

Account abstraction is not merely a theoretical construct but a technical innovation with specific mechanisms underpinning its operation. In essence, it alters the way transactions are initiated and executed within a blockchain network.

How Account Abstraction Works

Under traditional blockchain models, initiating a transaction involves an externally owned account (EOA) signing a transaction with a private key. This transaction is then broadcast to the network for validation and inclusion in the blockchain. Account abstraction, however, replaces this process with a more flexible one. Here, every account is a smart contract, and transactions are messages sent through these contracts. These smart contracts can encode complex rules for transaction validation, beyond what EOAs can do, such as multi-signature requirements or conditional transactions based on certain triggers.

The technical crux of account abstraction lies in the smart contract’s ability to define its own conditions for transaction execution. This means that user accounts can have unique security protocols or automated operations without the user needing to understand the underlying smart contract code.

Hey! Are you interested in the latest technologies in the blockchain area? be sure to read the article 'Top Zero-Knowledge Proof Projects to watch in 2023'

The Benefits of Account Abstraction

The implications of account abstraction are profound, offering a range of benefits that can enhance the blockchain experience for users and developers alike.

Improved User Experience

One of the most significant advantages of account abstraction is the improvement it brings to user experience. By abstracting away the complexities of key management and transaction rules, it presents a more intuitive interface for users.

Enhanced Security Features

Account abstraction also allows for the implementation of advanced security measures. Since each account can define its own logic, users can tailor their security settings to their specific needs. For instance, one might set up an account that requires additional verification for transactions exceeding a certain value or restricts withdrawals to certain addresses.

Future Implications

The future implications of account abstraction are vast. As the technology matures, it could become a standard feature of blockchain networks, potentially making the current distinction between user accounts and smart contracts obsolete. This could lead to a new wave of blockchain applications that are both powerful and accessible, bringing us closer to the vision of blockchain technology as a seamless part of everyday life.

Challenges and Considerations

Technical Limitations

One of the primary technical challenges of Acc. abstraction lies in its integration with existing blockchain protocols. Current networks are optimized for the EOA model, and introducing a new account structure necessitates significant changes to the core protocol. This includes modifications to the way transactions are propagated in the network, how gas fees are calculated, and how the state of the blockchain is managed. Ensuring that these changes do not compromise the network's performance or security requires careful planning and extensive testing.

Compatibility with Current Systems

Another consideration is the compatibility of account abstr. with the vast ecosystem of existing blockchain applications and services. Wallets, exchanges, and other services have been built around the traditional account model. Transitioning to an acc. abstraction model will require these services to update their infrastructure, which may be a complex and resource-intensive process. Furthermore, there is a need for standardization across the industry to ensure that different implementations of account abstr. can work seamlessly together.


Acc. abstraction represents a significant leap forward in the quest for a more user-friendly blockchain experience. By streamlining the transaction process and offering enhanced security features, acc abstraction has the potential to make blockchain technology more accessible to a broader audience. However, the path to widespread adoption is not without its obstacles. Technical challenges and compatibility issues must be carefully navigated to integrate it into the existing blockchain landscape.

Key Takeaways

How to Add Gnosis Chain to MetaMask: A Simple Tutorial


03 Nov 2023
How to Add Gnosis Chain to MetaMask: A Simple Tutorial

As the cryptocurrency ecosystem expands, there is an increasing need for various blockchains with distinct capabilities. Gnosis Chain enters the scene, offering a selection of unique characteristics. By integrating Gnosis Chain with MetaMask, users can access a more comprehensive array of decentralized services. We will walk you through the steps to add Gnosis Chain to your MetaMask wallet in this tutorial.


Setting up MetaMask

Before exploring the integration of Gnosis Chain, it is crucial to have MetaMask installed and operational:

  • Download and Install: If you have not done so already, visit the official website to download and install the MetaMask browser extension.
  • Setup Account: After completing the installation, create your account and make sure to remember the provided seed phrase. This phrase serves as your primary means for account recovery, so keep it secure.
  • Secure Your Account: Protecting your MetaMask account is of utmost importance. Use a robust password and never disclose your seed phrase to anyone.

Gnosis Chain

It is always helpful to have a basic understanding before incorporating any new blockchain into your wallet:

  • Gnosis Chain Overview: Gnosis Chain, a rising star in the blockchain world, brings a range of decentralized solutions to the table, such as prediction markets and decentralized trading platforms.
  • Benefits & Features: Among Gnosis Chain's main selling points are its accelerated transaction speeds and potentially lower fees when compared to congested networks.

Tutorial: How to Add Gnosis Chain to MetaMask

In the top right-hand corner of your browser, you'll find the wallet. If pinned, click on the MetaMask fox icon; if not, click the three dots in the top-right corner. The following screen will appear:

An option to expand the wallet to a new browser page is available by clicking "Expand view:"

This action will launch MetaMask in a new tab:

By clicking on the ‘Ethereum mainnet’ in the top left corner, you can add another network. Click ‘Add Network’

Choose option ‘Add a network manually’

Then, input the information below:

Network Name: Gnosis Chain formerly xDai

RPC URL: https://rpc.gnosischain.com

ChainID: 100

Symbol: XDAI

Block Explorer URL: https://gnosisscan.io

After saving the settings, Gnosis Chain will be added to your network.

The Benefits of Adding Gnosis Chain to MetaMask

With multiple blockchains becoming more common, integrating Gnosis Chain with MetaMask offers numerous advantages:

Expanded Capabilities: Accessing Gnosis Chain through MetaMask opens up a collection of exclusive applications and features inherent to this particular blockchain, which may include unique dapps or cutting-edge financial products.

Diversification: The crypto domain is extensive and constantly growing. By incorporating various chains like Gnosis into MetaMask, you broaden your potential investment opportunities and decentralized application experiences, ensuring no opportunities are missed.

Speed & Cost-Effectiveness: Network congestion and high gas fees on established platforms like Ethereum can discourage many users. Gnosis Chain's architecture has the potential to provide relief through quicker transaction times and more affordable fees.

In summary, as the possibilities within the crypto sphere continue to evolve, tools like MetaMask grant users access to this expanding world. By adding chains like Gnosis, users can stay ahead in this decentralized revolution.


By bridging platforms like Gnosis Chain with accessible tools like MetaMask, individuals not only amplify their engagement with decentralized applications but also fortify their position in this expansive realm. The integration of Gnosis Chain to MetaMask epitomizes the evolution of the crypto landscape – a testament to its ever-growing diversity and potential. As we continue to delve deeper into the decentralized future, tools and integrations like these will undoubtedly play a pivotal role in shaping our digital experiences and opportunities. Whether you're seeking more efficient transactions, diverse dapp interactions, or simply a broader understanding of the crypto ecosystem, this guide's steps open doors to a new horizon.