The cryptocurrency market in the past few months has seen an influx of government regulations targeted towards exchanges and payment processors that deal with digital assets.
Top cryptocurrency payment processor OpenNode recently introduced new identity verification measures for its users.
Users on various crypto forums have expressed privacy concerns regarding the growing scrutiny by companies such as OpenNode that deal with crypto assets. All seemingly opposing these new measures taken by them in the name of user protection seeking out alternatives with less stringent regulations.
Soon after OpenNode announced their new KYC norms, another popular payment processor, BitPay introduced customer KYC which requires ID verification for all individuals or businesses making high value transactions. The announcement followed a strong backlash from the community who rallied online to boycott BitPay and its services.
It is no surprise that these mandates negatively affect businesses in the long run. Shapeshift in late 2018 introduced KYC rules and within months lost a chunk of its customers as well as employees. Erik Vorhees, CEO Shapeshift noted:
“Business was declining from both aggregate market recession and increased competition. Our imposition of KYC’d accounts, themselves the result of trying to be cautious in a challenging regulatory environment, caused many of our most valuable API partners to leave us for competitors who have not perceived regulatory risks in the same way. We expected it, but still, it stung both financially and psychologically.”
The KYC model has been present in the traditional banking industry for quite some time, which have to keep up to date records of all its clients as a form of risk management and prevent illicit activities.
Most of the information collected by companies is stored in centralised systems. But despite tight security measures, these storage facilities are not 100% immune to cyber attacks or errors. Just earlier last month, Binance, a crypto exchange giant, allegedly got hacked, compromising data of about 60,000 users.
There still exists some very good alternatives such as Blockonomics, that do not require any user information. Open source bitcoin payment processing projects like BTCPay Server can subvert KYC requirements, however they have a high setup / learning curve that involves node setup etc. It remains to be seen how mass crypto adoption could happen in an increasingly regulated environment.
This is a press release. Trustnodes has not undertaken any verification of any of the above statements and any statement or project contained therein is not necessarily endorsed by Trustnodes. Readers are strongly urged to do your own research.