Almost every crypto exchange has some form of know your customer (KYC) process in place these days. KYC is vital in the fight against illegal uses of cryptos, as such more governments are beginning to require exchanges to execute KYC checks as standard. Shapeshift works similar to an atomic swap, whereby users deposit the crypto they own and receive the crypto they want within seconds – no accounts and maximum privacy. However, in the interest of KYC regulations – and a quite a large amount of abuse from the crypto community – it has decided to implement more data collection on its users.
KYC Wiping out Terrorism
Thanks to KYC procedures on almost every crypto exchange, terrorists are avoiding cryptos and sticking to cash. This is due to the fact that if they use cryptos, their transactions can be traced and the related funds confiscated more easily. KYC alone is the reason for the drop in illicit activity with cryptocurrencies, as the harmonious relationship between centralization and decentralized currencies is creating a safer environment. The DEA has even come out and said that it wished that more criminals would use cryptocurrencies, as transactions are far easier to trace.
Crypto Exchange Hanging on by a Thread
Unfortunately, Shapeshift hasn’t had an easy time over the years. Between March 2016 and April 2016, the exchange was hacked three times and a large amount of Ether, Bitcoin, and Litecoin was lost in the process. It has since fixed these security vulnerabilities, but its anonymous trading came into question very soon after. While it was unique in how it operated, it could now lose a number of its valuable customers due to its new KYC processes. If its users only used it for the anonymous crypto transfers, it could quickly see a huge decrease in trade volume.
KYC Disguised as a Membership Program
Shapeshift has been rather smart about how it implemented its new KYC processes. Instead of calling it KYC, it has touted it as a membership and loyalty program – it has even created its own tokens for reward points. All users will now be required to give the exchange a number of key identification documents, in return users will be rewarded with FOX tokens that can be used to pay for trade fees. This is one of the first KYC procedures to be disguised as a membership program – but will it actually fool traders? Time will tell,
KYC and anti-money laundering procedures could herald the end of decentralized crypto trading. In order for governments to become more accepting of cryptocurrencies, they will apply regulations on all aspects of the industry – trading included. However, the removal of the cloak that covers the crypto sphere could have an upside. This new blanket regulation could make the case for a Bitcoin ETF more valid and there is more chance the SEC could finally give an ETF application the green light.
