Binance, the world’s largest cryptocurrency exchange by volume, yesterday announced that it was teaming up with blockchain investigation and compliance firm Chainalysis to “help address the challenges at the intersection of cryptocurrencies, regulators and traditional financial institutions.” This news prompted a range of reactions from cryptocurrency enthusiasts and Binance users; some were happy that Binance was taking steps to legitimize the exchange, some worried that the data would be used by governments, and others claimed that the partnership went against the very purpose of cryptocurrency. So what exactly are they up to?
Binance Cleans Up Its Act
The Binance-Chainalysis partnership seems to have been prompted by Binance’s recent attempts to clean up their exchange, which started last month when it de-listed four coins it claimed fell below their “high standard of quality”. Utilizing Chainalysis’ KYT (Know Your Transaction) software, Binance will be able to monitor transactions in real time, with any suspicious activity flagged up instantaneously. This should help prohibit such practices as wash trading and spoofing, protecting investors and traders from getting stung. So, nothing to worry about. It’s all to keep us safe.
KYC For Everyone!
Privacy advocates however were not so quick to praise the move, raising concerns that this action represents another step towards the complete de-anonymization of the cryptocurrency marketplace. Binance currently allows a fairly generous two Bitcoin’s worth of daily withdrawals without having to surrender your identity, a precedent that some purists claim is at the forefront of the cryptocurrency movement. However, many exchanges have begun exacting tighter KYC controls in the face of growing calls for regulation in the space, with Shapeshift doing this through their membership program, and as the space matures and regulations are not only discussed but actually implemented, such practices are likely to increase.
Privacy vs Growth
Beneath the surface, this story represents a much bigger issue at the heart of cryptocurrency. If we really want this market to rival the world’s top markets and be worth trillions of dollars, then we have no choice but to fall in line with the regulations that permit that kind of investment. If however we value privacy over all else, then the cryptocurrency space will always be handicapped, both financially and reputationally. Put simply, if we want the floodgates to open then we need to be accepting of guards standing over us telling us where the water can go.