The banking version has existed for decades under bank-secrecy-act rules. The version that changed crypto came from international standards requiring virtual asset service providers to exchange sender and recipient identity data on transfers above a threshold.
Implementation is messy because blockchains carry no identity fields. Providers use side-channel messaging protocols to pass the data, and transfers to self-hosted wallets sit in a grey area handled differently across jurisdictions.
For users the practical effect is exchanges asking who owns a destination wallet, requiring proof of ownership, or blocking withdrawals to counterparties in non-compliant jurisdictions.
Related: bank-secrecy-act, sanctions-screening, anti-money-laundering, wallet, cex