AML and KYC in Crypto: The Rules Traders Can’t Ignore in 2025

I remember a night in April 2024, a few hours after the Bitcoin halving confetti fell, when a routine stablecoin withdrawal got flagged. “Additional info needed.” That hold felt like an eternity while the chart looked brutal. That was my wake‑up call: in bull markets, it’s not just price risk anymore. It’s compliance risk. And if you trade size—or even just move funds quickly between venues—you need AML and KYC wired into your playbook, not bolted on as an afterthought.

What are AML and KYC in crypto, really?

• AML (Anti‑Money Laundering): the rules that force exchanges, brokers, and even some wallets to detect and report suspicious activity.

• KYC (Know Your Customer): the identity checks that tie your account to you—ID, proof of address, sometimes source-of-funds.

In practice? It’s risk scoring on deposits, screening addresses, Travel Rule data sharing between platforms, SAR filings, and—when you least want it—withdrawal holds while compliance pings you for more info. It’s not fun. But without it, the on‑ramps, banks, and payment rails we rely on simply won’t play ball.

Why AML/KYC matters now

The ground shifted in 2024–2025. A few highlights that matter to anyone moving crypto:

• Illicit volumes are more measurable—and regulators are using that visibility. Chainalysis estimated that known illicit addresses received roughly $40.9B in 2024, with likely upward revisions toward ~$51B as more addresses are identified. Translation: the data exists, and it’s being used. (chainalysis.com)

• Hacks roared back in 2025. By mid‑year, stolen funds had already topped 2024’s total, including a record‑setting exchange exploit, pushing risk teams to tighten withdrawals and blacklist routes faster than before. If you’ve noticed more “compliance checks,” you’re not imagining it. (chainalysis.com)

• Europe put real teeth behind rules. MiCA’s stablecoin regime began on June 30, 2024, and broader CASP requirements kicked in on December 30, 2024 (with transitional windows by country). Simultaneously, the EU “Travel Rule” applies to all crypto transfers—yes, with no de minimis threshold. If your flows touch EU platforms, expect full originator/beneficiary data on even small transfers. (micapapers.com, eba.europa.eu, europarl.europa.eu)

• In the U.S., enforcement is no longer theoretical. Binance paid a multibillion‑dollar settlement, and its founder, CZ, was sentenced to four months in April 2024 for AML failings. That wasn’t a headline for lawyers; it was a lighthouse for every compliance team. (ft.com)

• Mixers and anonymity tools are squarely in the crosshairs. FinCEN has proposed a “special measures” rule treating cross‑border CVC mixing as a primary money‑laundering concern, with broad reporting obligations for covered institutions. Even if you never touch a mixer, interacting with tainted flows can get your funds stuck in limbo. (fincen.gov)

• Stablecoins went mainstream policy. On July 18, 2025, the U.S. enacted the GENIUS Act, the first federal stablecoin framework mandating 1:1 reserves, disclosures, and KYC/AML obligations. Expect more bank‑grade compliance—and better fiat on/off ramps—as issuers and banks align. (womblebonddickinson.com, reuters.com)

• Public‑private crimefighting is accelerating. The T3 Financial Crime Unit (TRON, Tether, TRM Labs—now with Binance as a collaborator) says it has frozen over $250M in illicit assets since late 2024. Freezes aren’t recoveries, but they’re a warning: dirty routes are getting pinched in real time. (trmlabs.com)

Here’s the kicker: FATF is still unhappy with global Travel Rule adoption. That means more jurisdictions will tighten, not loosen, the screws—especially around cross‑border transfers and self‑hosted wallet checks. (fatf-gafi.org)

Bitcoin halving, crypto cycles—and compliance cycles

Back in 2021, I watched BTC crater and learned (painfully) that liquidity can vanish while you’re waiting for a confirmation. In 2024–2025, there’s a new layer: KYC/AML friction can force delays, especially when on‑chain flows light up your exchange’s risk scores. If you trade around halving‑driven supply shocks, plan for compliance friction the same way you plan for spread and slippage.

Halving history and the compliance backdrop

Halving | Date | Block reward | Market vibe | Compliance backdrop (thumbnail)

—————————————-

1st | Nov 28, 2012 | 50 → 25 BTC | Wild West | Minimal guidance; early exchange KYC

2nd | Jul 9, 2016 | 25 → 12.5 | Maturing venues | FATF tightening; early Travel Rule chatter

3rd | May 11, 2020 | 12.5 → 6.25 | DeFi summer | Analytics everywhere; mixer scrutiny

4th | Apr 19–20, 2024 | 6.25 → 3.125 | Institutional flows | EU MiCA + zero‑threshold Travel Rule; U.S. enforcement heats up

Note: EU Travel Rule zero threshold applies from December 30, 2024, and MiCA’s stablecoin provisions started June 30, 2024. The U.S. GENIUS Act followed on July 18, 2025, locking in AML/KYC for payment stablecoins. (eba.europa.eu, micapapers.com, womblebonddickinson.com)

How long do cycles last?

The crypto‑native answer is “about four years,” rhythmically tied to the halving. But since 2022, macro and regulation have stretched and compressed that arc. Liquidity can flood in via stablecoins during risk‑on windows—and just as quickly jam if compliance flags a route. My take: the price cycle’s still 3.5–4.5 years, but the “compliance cycle” now moves in quarters—whenever big enforcement, hacks, or new rules hit, spreads widen and settlement slows. (chainalysis.com)

So how do you take advantage—without getting your account frozen?

Here’s what’s worked for me (and what I coach friends to do):

• Pre‑verify everywhere you might need to trade. Don’t wait until a halving rally to upload a passport. KYC your primary and backup exchanges now.

• Map your rails. If you move size via stablecoins as an inflation hedge, know which issuers and chains your venues prefer. Post‑GENIUS, U.S. issuers are leaning into bank‑grade controls; that can mean faster fiat ramps but stricter screening. (womblebonddickinson.com)

• Keep addresses “clean.” Avoid interacting with services that could be deemed mixers, and don’t accept funds from random third‑party addresses. Address reputations matter more than you think. (fincen.gov)

• Travel Rule etiquette. When sending to/from EU‑touching platforms, be ready to provide complete originator/beneficiary info—even for small transfers. Self‑hosted wallet checks kick in above certain thresholds. (eba.europa.eu)

• Use analytics‑aware tools. Many venues screen with Chainalysis/TRM/Elliptic. If you’re routing through DeFi, consider a quick address check before you hit send.

• Stage liquidity ahead of catalysts. Before CPI prints, halving windows, or big unlocks, move what you’ll need—and clear any compliance tickets—24–48 hours early.

• Document source of funds. Sounds obvious, but screenshots of fiat wires, miner payouts, or previous exchange withdrawals can shave hours off a review.

• Diversify chains. If TRON or Ethereum gets congested (or risk‑flagged for a sector‑specific scam wave), having USDC/USDT liquidity on multiple L2s or competing L1s can save a trade. Public‑private freezing actions are faster now. (trmlabs.com)

Quick wins if you’re hedging inflation with stablecoins

• Stick to reputable issuers with transparent reserves and monthly attestations—now a U.S. law standard for payment stablecoins. (womblebonddickinson.com)

• Park working capital on chains your exchanges love (and settle fast on). Gas matters when seconds count.

• Automate alerts for wallet blacklisting events on your preferred issuer/chain.

• Keep a small fiat buffer. When compliance friction spikes, old‑school dollars can bridge you.

Trading strategies that respect AML reality

• Pre‑position into catalysts (Bitcoin halving, ETF flows) on fully verified accounts.

• Split execution across venues to minimize single‑point compliance holds.

• For DeFi yield, prefer pools with clean counterparty flows and high‑quality oracles—less chance of being caught in cross‑protocol investigations.

• Rotate to BTC and top stables in turbulence. They clear faster, attract more liquidity, and face fewer heuristics false positives than obscure tokens.

Final thought

Not gonna lie: the first time a compliance ping threatened to blow up my setup, it felt like a gut punch. But after trading through three halvings, multiple bear cycles, and a fair share of late‑night panic, I’ve learned this: traders who treat AML/KYC as part of their edge—just like they treat spreads, funding, or macro—move faster when it counts. That’s why I lean on a clear rails map, pre‑verified accounts, and tools that flag risk before compliance does. If you want a single dashboard for this kind of prep, that’s where I lean on vtrader.io—so I can focus on the trade, not the ticket.

Sources:

• https://www.chainalysis.com/blog/2025-crypto-crime-report-introduction/

• https://www.chainalysis.com/blog/2025-crypto-crime-mid-year-update/

• https://micapapers.com/guide/timeline/

• https://www.eba.europa.eu/publications-and-media/press-releases/eba-issues-travel-rule-guidance-tackle-money-laundering-and-terrorist-financing-transfers-funds-and

• https://www.europarl.europa.eu/doceo/document/TA-9-2023-0118_EN.html

• https://www.ft.com/content/741ba419-aceb-455e-8aee-9715d3ef4c1c

• https://www.fincen.gov/news/news-releases/fincen-proposes-new-regulation-enhance-transparency-convertible-virtual-currency

• https://www.womblebonddickinson.com/us/insights/alerts/update-2025-us-stablecoin-legislation

• https://www.reuters.com/legal/government/companies-plan-stablecoins-under-new-law-experts-say-hurdles-remain-2025-08-12/

• https://www.trmlabs.com/resources/blog/t3-financial-crime-unit-launches-t3-global-collaborator-program-over-250m-in-criminal-assets-frozen-as-binance-becomes-first-member