Managing a crypto platform comes with excitement and the opportunity to help people create digital assets. Thousands of users are signing up to trade, and your goal is to scale quickly across borders. But when your platform faces a sudden surge of fraudulent activity, what do you do?

In 2024 alone, over $14.5 billion was lost globally to crypto scams, from phishing attacks to fake investment schemes. The opaque nature of blockchain transactions makes crypto platforms particularly vulnerable to fraud risks, and tracking the movement of funds across wallets is complex. 

KYC in crypto was a crucial first step, confirming users before they began trading. But as fraudsters get smarter, verifying identity alone is no longer enough.  KYT in crypto transaction monitoring provides deeper insight into the flow of funds across your platform, helping you detect risky activity before it escalates.

In this article, you’ll learn how KYT in crypto works, why it is critical for your platform, and how to choose the right tools to help you manage risks effectively.

What Is KYT (Know Your Transaction)?

KYT, or Know Your Transaction, is the process of tracking and analyzing financial or crypto transactions to understand where funds come from and where they’re going. Unlike KYC (Know Your Customer), which verifies who your users are, KYT focuses on what they do — the movement of money. It helps your platform see beyond user identity and monitor transaction behavior in real-time, spotting unusual patterns that could indicate fraud or money laundering.

In crypto, KYT is key for AML (Anti-Money Laundering) compliance and risk detection. Because blockchain transactions are public but not tied to real identities, exchanges use KYT to link wallet activity to verified users and flag suspicious transfers. 

Regulators such as the FATF, along with regional bodies like the CBN and SEC Nigeria, now require Virtual Asset Service Providers (VASPs) to implement AML programs that include transaction monitoring and Travel Rule compliance. These ensure crypto transactions remain traceable and platforms stay compliant across markets.

Why KYT Matters for Crypto Companies

If you manage a crypto exchange or wallet, here are key reasons why KYT is essential to your operations.

1. Prevent fraud and financial crimes

Crypto transactions happen fast, often across borders, and can be exploited to move illicit funds. KYT helps detect suspicious transaction patterns in real time and stop fraud before it spreads. This proactive approach keeps your platform from being used as a channel for illegal activity.

2. Build regulatory trust and compliance readiness.

Regulators are becoming stricter about how crypto companies track and report transactions. Implementing KYT shows that your platform prioritizes compliance and is ready for audits or licensing requirements. This builds confidence with partners, regulators, and investors who value transparency.

3. Identify suspicious wallet activity early.

Every wallet has a behavior pattern, and sudden changes can signal potential risk. KYT helps you spot abnormal activity like large, quick transfers or links to flagged addresses before it becomes a bigger issue. Early detection protects your business from financial or reputational damage.

4. Reduce exposure to high-risk jurisdictions or crypto mixers.

Some transactions may unknowingly pass through sanctioned regions or anonymizing tools like mixers. KYT flags these high-risk sources and destinations, helping your team take immediate action. This reduces your exposure to regulatory violations and helps you maintain global compliance.

5. Strengthen user confidence and transparency.

Users are more likely to trust a platform that takes security and compliance seriously. With KYT in place, every transaction can be verified and traced, giving users confidence that their funds are safe and handled responsibly. Over time, that trust becomes a competitive advantage.

Related: Learn all about how KYC in Crypto works

How KYT in Crypto Works: Key Processes Explained

Here’s a step-by-step look at how KYT works on your crypto platform:

Step 1: Transaction data collection

KYT starts by collecting transaction data from your exchange and public blockchains. For example, when a user moves Bitcoin between wallets, the system logs addresses, amounts, and timestamps. That full visibility lets you trace flows and link on-chain activity to platform accounts.

Step 2: Risk scoring

The system assigns risk scores to wallets and transactions based on factors like source of funds, amount, and frequency. If a user receives funds from a flagged address or a known mixer, their score goes up and the transaction is marked higher risk. Scoring helps your team prioritise which alerts to investigate first.

Step 3: Pattern analysis

Analytics and AI then look for behavioral patterns and anomalies such as sudden spikes, repeated small transfers, or rapid swaps across addresses. For example, splitting a large deposit into dozens of tiny transfers can signal layering. Pattern analysis uncovers schemes that simple rule checks would miss.

Step 4: Alerts and escalation

When thresholds are hit, the system creates alerts and opens cases for investigation. You might see an automated block on a suspicious outgoing transfer while the compliance team reviews the details. Clear escalation rules ensure risky activity is contained quickly and handled consistently.

Step 5: Reporting and audit trails

KYT platforms record detailed logs and generate reports for regulators or internal audits. If needed, the system can produce a suspicious activity report with linked transactions and wallet histories. These audit trails provide evidence for investigations and prove your platform’s compliance posture.

Also see: How crypto transaction monitoring works

Challenges in Implementing KYT in Crypto

Now that you understand how KYT in crypto works, it’s important to know the hurdles you might face when implementing it on your platform.

1. Data privacy and regulatory differences across countries

Crypto regulations vary widely, and what’s legal in one country may violate privacy rules in another. This makes applying a single KYT system across multiple regions tricky. Exchanges must carefully balance monitoring transparency with compliance to different data protection and AML standards.

2. High cost of analytics tools for startups

Advanced KYT and blockchain analytics platforms can be expensive to license, integrate, and maintain. Smaller exchanges may struggle to access the same level of monitoring as larger players. Without these tools, transaction tracking may be slower, less accurate, and more prone to oversight.

3. High false positives

KYT systems can flag normal transactions as suspicious, which your compliance team may find overwhelming. Too many alerts slow down the review of genuinely risky activity. Platforms need to fine-tune rules and combine automated scoring with human oversight to manage false positives effectively.

4. Complexity of tracing crypto mixers and anonymized wallets

Fraudsters often use mixers, tumblers, or privacy coins like Monero to hide transaction trails A user may split a deposit across multiple wallets through a mixer to obscure the origin. Even with KYT, tracing these movements requires cross-chain monitoring and advanced analytics to catch suspicious activity.

5. Constantly changing regulatory expectations

Regulations in crypto evolve faster than most systems can adapt. New AML, VASP, or travel rule updates often require major changes to your KYT setup. Staying compliant becomes a constant challenge when laws evolve faster than your tools and processes can adjust. 

See:  Processes and tools for AML Crypto transaction monitoring 

Core Strategies for KYT in Crypto Transaction Monitoring

If you already have KYT systems in place, what matters next is how you use them. Here are strategies you can implement to ensure effective monitoring on your crypto platform.

1. Implement real-time monitoring with automated alerts

KYT tools that monitor transactions in real-time help you catch suspicious activity before it escalates. As funds move across wallets, automated alerts notify your compliance team instantly to review or block high-risk transfers. This keeps your platform protected even during heavy trading hours.

2. Use risk-based approaches

KYT systems can analyze thousands of transfers at once, but not every transaction needs equal attention. A risk-based approach prioritizes reviews based on factors like transaction size, wallet history, or source of funds. This ensures your team focuses on the riskiest behavior first without wasting time on low-risk activity.

3. Integrate blockchain analytics with internal user data

Combining KYT insights with KYC data gives you a full view of user behavior. When your monitoring tool flags a wallet, linking it to a verified profile helps you understand who is behind the transaction. This makes it easier to confirm whether it’s legitimate or a potential case of fraud.

4. Build cross-chain visibility

Fraudsters often move assets across multiple blockchains to avoid detection. Using a KYT tool that supports cross-chain tracking lets your platform trace funds anywhere. This broader visibility ensures you don’t miss suspicious activity hiding between networks.

5. Maintain ongoing reviews and audits

Even the best KYT setup needs regular updates. Running internal audits and system reviews helps you fine-tune risk rules, reduce false positives, and stay aligned with new AML regulations. Continuous improvement keeps your platform compliant and ready for growth.

See how Dojah helped ZendWallet cut fraud risks and build user trust in crypto.

How to Choose Your KYT Tool for Crypto

If you're currently evaluating KYT tools for your crypto platform, here are key factors to guide your choice.

1. Real-time data feeds

Your KYT tool should process transactions instantly so you can spot unusual wallet movements as they happen. For instance, if a user suddenly transfers a large sum to an unknown address, real-time tracking helps you respond before any damage is done. Without it, you’re always one step behind potential fraud.

2. Easy integration (API-first)

Choose a tool built for developers, with simple APIs that fit into your existing wallet or exchange setup. It should connect smoothly without heavy customization or delays every time you launch a new feature. That flexibility saves your team time and keeps compliance effortless as you scale.

3. Regulatory reporting dashboards

A good KYT solution simplifies compliance reporting by turning raw data into clear, audit-ready summaries. Your team should be able to generate suspicious activity reports quickly and efficiently, without spending hours on manual work. This also keeps your platform audit-ready.

4. Support for multiple blockchains

Users move funds across several networks, and your KYT tool should follow every step. Whether they’re transacting on Ethereum, Polygon, or Bitcoin, cross-chain visibility ensures nothing slips through. Without it, criminals can easily hide movement between chains and exploit those blind spots.

5. Responsive technical support

Look for a provider that offers quick, knowledgeable support during integration and live monitoring. When alerts fail or features break, fast support ensures your monitoring runs smoothly and your team stays focused on real threats.

How Dojah Supports KYT for Crypto Platforms

Crypto platforms need KYT tools that can handle fast-moving transactions, detect risk early, and meet AML requirements. Dojah’s EasyDetect combines all of these into one reliable solution, designed to help crypto businesses monitor transactions seamlessly. With it, you get:

1. Accurate transaction tracking

 EasyDetect delivers up to 99.9% accuracy when analyzing crypto transactions and user risk data. This means your alerts are based on verified information, not guesswork. With cleaner data, your team spends less time on false positives and more time addressing real suspicious activity.

2.  Real-time alerts

Speed is critical in KYT for crypto. EasyDetect continuously reviews transactions and flags suspicious activity as soon as it occurs. This helps your team act quickly to prevent potential fraud or regulatory breaches before they escalate.

3.  Custom rules for your platform

Every crypto exchange or wallet operates differently. EasyDetect allows you to set and modify monitoring rules for high-risk tokens, large transfers, or region-specific AML conditions. This flexibility ensures your KYT process reflects your unique risk model and operational needs.

4. Pre-built crypto templates

EasyDetect comes with ready-to-use templates for detecting activities such as wash trading, unusual wallet behavior, or high-volume cross-border transfers. These templates help you start monitoring immediately without building workflows from scratch.

5.  Integrated KYC and KYT

EasyDetect integrates seamlessly with Dojah’s KYC tools, giving you a full picture of both user behavior and fund movements. This unified view improves accuracy and strengthens your compliance framework.

6.  Simplified compliance reporting

Regulators expect timely and well-organized reporting. With EasyDetect, you can generate Suspicious Transaction Reports (STRs), audit logs, and transaction histories quickly and accurately. This reduces manual effort and keeps your team audit-ready at all times.

Keeping Your Crypto Platform Secure

In crypto, a single suspicious transaction can trigger major fines or reputational damage.  KYT monitoring helps you spot risks early, protect your users and keep your platform running smoothly. Acting before issues escalate is the difference between a safe platform and costly disruptions.

Dojah’s EasyDetect makes this simple with real-time alerts and intelligent risk detection, so you can focus on growing your crypto business instead of chasing threats. Trusted by leading fintechs and platforms across Africa, it helps you stay secure in a fast-moving market.

 Book a demo today to see how Dojah can safeguard your crypto platform

FAQs on KYT in Crypto Transaction Monitoring

1. What is KYT in crypto?
KYT (Know Your Transaction) in crypto refers to monitoring and analyzing blockchain transactions to detect suspicious or high-risk activity. It helps crypto platforms identify potential money laundering, fraud, or terrorist financing patterns in real time.

2. How does KYT differ from KYC?
KYC (Know Your Customer) verifies a user’s identity before they can trade, while KYT tracks and analyzes their transactions after onboarding. Together, they give crypto platforms full visibility into who the user is and how their funds move.

3. Why is KYT important for crypto compliance?
Crypto exchanges and wallets are under strict AML regulations. KYT ensures you can detect unusual patterns, flag risky behavior, and report suspicious transactions, keeping your platform compliant and secure.

4. What tools are used for KYT in crypto?
Modern KYT tools use blockchain analytics, AI-driven risk scoring, and real-time transaction tracking. Solutions like Dojah’s EasyDetect help crypto businesses monitor transactions efficiently and reduce manual reviews.

5. How can KYT help prevent crypto fraud?
By monitoring the flow of funds across wallets, KYT detects red flags such as mixing services, high-value transfers, or links to sanctioned addresses. This allows your team to prevent fraud before it causes damage.