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KYT vs KYC: What's the Difference in Crypto Compliance?

KYC verifies who a customer is; KYT monitors what their transactions do. Here is how the two differ, why crypto firms use both, and how Sixpence supports the KYT side.

Research

KYT vs KYC: What's the Difference in Crypto Compliance?

Direct answer

KYC, Know Your Customer, verifies who a customer is, usually once, at onboarding. KYT, Know Your Transaction, monitors what a customer's transactions do, on an ongoing basis. KYC confirms identity; KYT evaluates the risk signals associated with the transactions that follow. They are complementary controls, and most regulated crypto firms operate both.

Why this matters

KYC and KYT are often mentioned together, which makes them easy to confuse. They answer different questions and run at different times. Knowing the difference helps a business design the right controls and helps anyone reading about crypto compliance understand why an exchange both checks your identity at signup and keeps an eye on transactions afterwards.

How it works

KYC: who is the customer?

KYC is the identity layer. At onboarding, a firm collects and verifies identifying information and screens the customer against sanctions and politically-exposed- person lists. The output is a decision to accept or decline the customer. KYC is typically a point-in-time check, refreshed periodically.

KYT: what are the transactions doing?

KYT extends compliance beyond identity checks to monitor ongoing transaction behaviour. It evaluates transaction risk using multiple signals, such as the origin and destination of funds, screening of receiving addresses, and behavioural patterns, and it can raise an alert for review. A risk score or alert is decision-support, not proof of wrongdoing.

Side by side

KYC KYT
Question Who is the customer? What risk is associated with the transactions?
Timing At onboarding, refreshed periodically Ongoing, in real time or at configured intervals
Inputs Identity documents, sanctions and PEP screening On-chain flows, counterparties, risk signals
Output Accept or decline the customer A risk signal to review and document

A related term, KYA (Know Your Address), sits on the transaction side too: it screens and attributes a specific blockchain address. See the related guide on KYA.

Practical example or analogy

KYC checks who entered, while KYT evaluates the risk signals associated with the transactions that follow. KYC is the identity check at the door; KYT is the ongoing context about what happens after. Neither replaces the other.

Key steps or considerations

For a firm operating both:

  1. Use KYC to establish identity and screen the customer at onboarding.
  2. Use KYT to monitor transactions continuously after onboarding.
  3. Connect them. A KYT alert is more useful when tied back to a known, verified customer.
  4. Document both. Keep records of identity checks and of transaction reviews.
  5. Map to your obligations. What you must do depends on your jurisdiction, licence, and activity.

How Sixpence supports the KYT side

KYC identity verification and KYT transaction monitoring are usually handled by different tools. Sixpence focuses on the transaction side, with distinct products.

  • LedgerBrain provides KYT monitoring and screening. It runs 24/7 real-time transaction monitoring with automated pattern detection and alerts, and screens addresses against OFAC, UN, and EU sanctions lists with a 0 to 100 risk score. This is the ongoing transaction view that complements a firm's KYC.
  • LedgerWatch supports investigation and recordkeeping. It provides a transaction graph and case files with export for suspicious-activity reporting, so an alert can be investigated and documented.

Sixpence supports the KYT and investigation layers; identity verification (KYC) remains a separate control in a firm's stack. The two together give a fuller picture than either alone.

Limitations and compliance considerations

  • KYC and KYT are not interchangeable. Doing one does not satisfy the other.
  • A risk signal is not a verdict. KYT outputs support review; people decide.
  • Obligations depend on context. Requirements vary by jurisdiction, licence, and activity. This is general information, not legal advice.

Frequently asked questions

Is KYT a replacement for KYC? No. KYC verifies identity; KYT monitors transactions. Most regulated firms need both.

Does KYC happen more than once? It is typically done at onboarding and refreshed periodically, especially if circumstances change.

Where does KYA fit? KYA screens and attributes a specific address, which is part of the transaction side alongside KYT.

Is KYT legally required by name? The term is not written into law. AML rules require transaction-monitoring and reporting controls that KYT tooling helps implement; obligations depend on jurisdiction.

Conclusion

KYC and KYT answer different questions: who the customer is, and what their transactions do. KYC is the identity check at onboarding; KYT is the ongoing transaction monitoring that follows. Most regulated crypto firms run both. Sixpence supports the transaction side, with LedgerBrain for KYT monitoring and screening and LedgerWatch for investigation and records. To see how the transaction controls work, review the LedgerBrain details at ledgerbrain.io.

Sources

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