Key Takeaways:
KuCoin’s implementation of mandatory Know Your Customer (KYC) procedures has led to a staggering 77% reduction in its Bitcoin reserves, as privacy-conscious users opted to withdraw their assets rather than comply with the new regulations.
This significant capital outflow highlights the ongoing sensitivity that cryptocurrency users have towards regulatory changes and compliance measures.
KuCoin’s situation underscores the tough balance that cryptocurrency exchanges must navigate between adhering to regulatory requirements and retaining their user base as global anti-money laundering (AML) standards tighten.
Since mid-2023, when KuCoin, one of the leading global cryptocurrency exchanges, announced the mandatory KYC policy, the exchange has experienced a severe contraction in its Bitcoin reserves.
The Bitcoin reserves plummeted by 77%, falling from 18,300 BTC to a mere 4,100 BTC, according to data from Onchain School.
KuCoin’s BTC Reserves Have Dropped from 18,300 to 4,100 since 2023
Analyzed data points to the timeline between June 5 and June 28, 2023, during which the exchange lost over 14,000 BTC, directly paralleling the announcement of stricter KYC protocols.
On-chain analytics revealed, “The drop from 18,300 BTC to just 4,100 BTC marks a net outflow of 14,200 BTC — a 77.6% decrease,” as shared by CryptoQuant.com on May 5, 2025.
The outflow began shortly after June 5, when initial rumors of a KYC overhaul emerged, intensifying with the formal announcement from KuCoin on June 28, which confirmed that new users would need to complete KYC verification starting July 15.
Furthermore, existing users were informed they must also complete KYC to maintain access to essential services like new deposits, although they could still use limited features such as withdrawals and redemptions on staking products.
While a decline in exchange reserves is a trend seen across the cryptocurrency industry, the pace and magnitude of KuCoin’s reserve drop is particularly striking.
Onchain School commented that, “The timing and scale of this outflow correlate significantly with the enforcement of KYC,” indicating a marked sensitivity among users towards compliance-related alterations, especially when their privacy appears at risk.
KuCoin’s transition to mandatory KYC was part of its broader effort to comply with global AML practices. The exchange highlighted its responsibility to adhere to anti-money laundering guidelines and global compliance standards as justification for the change.
Mounting regulatory challenges in the United States played a substantial role in prompting this policy shift. In 2024, the U.S. Attorney’s Office disclosed that KuCoin and its parent company, PEKEN GLOBAL LIMITED, had breached U.S. AML and KYC laws.
As part of a settlement, KuCoin consented to pay a $297 million fine and exit the U.S. market for a minimum of two years.
Federal prosecutors argued that KuCoin neglected to register as a money services business with FinCEN and intentionally evaded basic AML protocols, allowing billions in suspicious transactions to occur on its platform.
U.S. Attorney Danielle R. Sassoon stated, “KuCoin served as a vehicle for laundering the proceeds of criminal activities,” emphasizing the seriousness of the charges against the exchange.
The indictment further alleged that for years, KuCoin had no effective KYC or AML processes despite servicing over 1.5 million U.S. customers and generating over $184 million in fees since 2017. Many internal procedures had been overlooked or were entirely missing, and customer identities remained largely unverified until mid-2023.
KuCoin Users Exit En Masse as KYC Rules Extend to Broker Accounts
Although KYC protocols were initiated for new users in July 2023, existing users had the leeway to trade or withdraw without verification for some time. However, the swift implementation of mandatory checks for all exchange broker sub-accounts in early 2024 took many users by surprise.
Users are now required to submit their KYC documentation through KuCoin’s API for broker sub-accounts, and the platform has indicated that individuals will only need to verify once per account.
KuCoin has specified that standard sub-accounts created under a master account remain exempt from the KYC mandate.
Despite these accommodations, the substantial withdrawal activity suggests that a considerable proportion of KuCoin’s user base, particularly those who prioritize anonymity, chose to move their funds elsewhere rather than comply with the new requirements.
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