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How Exchanges Verify Business Entities (KYB)

Crypto exchanges verify business entities through know-your-business (KYB) onboarding: they confirm the entity exists and is in good standing, match it to its IRS EIN, read the operating agreement or bylaws to identify who controls it, and require beneficial-ownership certification of the individuals who own 25% or more. The aim is to confirm who actually owns and runs the entity, which is a standard part of regulated finance.

What KYB Is and Why Exchanges Do It

Know-your-business is the entity-level version of know-your-customer (KYC). Where KYC verifies an individual, KYB verifies a company and the people behind it. Crypto exchanges that serve U.S. business customers generally apply AML programs and customer due-diligence procedures, which include identifying the entity and its beneficial owners. This is not specific to crypto; it mirrors what banks do under federal customer due-diligence rules. An exchange runs KYB to satisfy its own compliance obligations and to manage the risk of opening an account for an entity it cannot identify.

This page sits under the crypto banking hub. The same verification logic applies when you open a crypto business account at a credit union or neo-bank, so preparing one package generally serves both.

The Documents Exchanges Check

EIN (Employer Identification Number)

The EIN is the entity's federal tax ID, issued by the IRS. An exchange uses it to confirm the entity is a real, registered taxpayer and to tie tax reporting to the correct account. Provide the IRS confirmation, the CP 575 notice or the SS-4 result, with the entity name exactly as filed. A mismatch between the name on the EIN and the name on the formation documents is a common reason verification stalls.

Operating Agreement or Bylaws

For an LLC, the operating agreement establishes who the members and managers are and who has authority to act for the entity. For a corporation, bylaws and a board resolution do the same. Exchanges read these to confirm that the person opening the account is authorized and to map ownership and control. A current, signed agreement matters; a missing or outdated one slows review. For what an LLC's agreement should contain, see should I put my crypto in a Wyoming LLC and the entity guidance in the Crypto LLC & Entity Formation Hub.

Beneficial-Ownership Certification (FinCEN BOI)

Beneficial-ownership rules require institutions to identify individuals who own 25% or more of an entity and at least one individual who exercises substantial control. Exchanges collect this through a beneficial-ownership certification: names, dates of birth, addresses, and government-ID details for each covered person.

Note two distinct beneficial-ownership regimes. The FinCEN customer due-diligence (CDD) rule has long required financial institutions to collect beneficial-ownership information from legal-entity customers at account opening. Separately, the Corporate Transparency Act created a Beneficial Ownership Information (BOI) reporting framework requiring many entities to report ownership directly to FinCEN; the scope and enforcement of that direct-reporting requirement have changed over time and remain subject to rulemaking and litigation. Confirm your entity's current direct-filing obligation with qualified counsel, separate from the certification an exchange asks you to sign at onboarding.

What Exchanges Are Looking For

Beyond the documents, KYB review assesses whether the picture is consistent:

  • The entity name matches across the EIN, formation documents, and application.
  • The named owners and control person match the operating agreement and the beneficial-ownership certification.
  • The stated business activity is plausible and described accurately, not crafted to obscure crypto activity.
  • The address fields are consistent. For the principal-vs-business-address question, see what address do I give exchanges.
  • The business type and NAICS code fit the activity, as covered in what business type and NAICS codes for a crypto LLC.

Related Questions

What is the difference between KYC and KYB?

KYC verifies an individual customer; KYB verifies a business entity and the people who own and control it. An entity account triggers KYB, which still includes KYC on the beneficial owners and the authorized control person. Both exist so a regulated institution can confirm who it is actually dealing with.

What counts as a beneficial owner?

Generally, an individual who owns 25% or more of the entity, plus at least one individual who exercises substantial control (such as a senior officer or managing member). Exact thresholds and definitions come from the applicable rule, and an exchange's certification form will specify what it requires. Confirm current definitions, which can change.

Do I have to report ownership to FinCEN directly, or just to the exchange?

These are two different things. The exchange collects a beneficial-ownership certification for its own customer due-diligence obligations at onboarding. The Corporate Transparency Act's direct BOI reporting to FinCEN is a separate requirement whose scope and enforcement have shifted; whether your entity must file directly is a legal question to confirm with counsel and current FinCEN guidance.

Sources

Compliance Note

This article is for educational purposes only and does not constitute legal, tax, or investment advice. KYB, KYC, and beneficial-ownership verification are normal parts of regulated finance, presented here so an entity can prepare an accurate, complete application, never as something to evade or work around. Business classification and descriptions should reflect actual activity. The Corporate Transparency Act's direct BOI-reporting requirement has changed over time and remains subject to rulemaking; verify your current obligation with qualified counsel rather than relying on this summary. Advisory services are provided by DAG Wealth, LLC, an SEC-registered investment adviser; DAG Wealth is a brand pending a Form ADV update. Registration does not imply a certain level of skill or training.

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