Crypto glossary
Source of funds
Source of funds is the evidence banks and exchanges request to show where money or crypto came from, such as salary, a sale or crypto trading gains.
Anti-money laundering rules require regulated firms to understand where a customer's money comes from when amounts are significant, unusual or high risk. Source of funds refers to the origin of the specific money in a transaction, such as a salary, a property sale or the proceeds of selling bitcoin. Source of wealth, a related concept, refers to how the customer built their overall assets.
Crypto users meet this requirement in two directions. Exchanges ask for it when large deposits arrive, and banks ask for it when large transfers come in from exchanges. Useful evidence includes exchange statements showing purchase and sale history, wallet addresses and transaction hashes linking deposits to known accounts, tax returns that declared crypto gains and, for early holders, old emails or receipts from purchases years ago.
Missing documentation is a common problem for long-term holders whose early exchanges have closed. Without a credible trail, banks may block transfers or close accounts, so keeping records from the start is far easier than reconstructing them later.
Example
A Spanish user sells bitcoin and transfers 80,000 euros to his bank, which blocks the funds until he provides exchange statements, the original purchase records and his tax return declaring the gain.