Against the Roots: LocalBitcoins to Change KYC-AML Policy from November 2019
April 2, 2019 by Jeff Fawkes
On February 8th 2019, all LocalBitcoins users received a message saying the European Union is introducing new KYC-AML standards. One of the oldest companies in the bitcoin industry, which follows the anarcho-privacy and cypherpunk spirit by allowing P2P trading, is ready to shift away from supporting BTC social security.
Also read: Crypto Exchange Zebpay Integrates Lightning Network Wallet Service
Subscribe to the Bitsonline YouTube channel for great videos featuring industry insiders & experts
All Roads Lead to KYC
According to a LocalBitcoins blog post, Finland is already implementing crypto-related laws, before the E.U. itself issues an obligatory request that sounds vaguely like some crypto token itself: 5AMLD (”Anti Money Laundering Directive”). Localbitcoins must follow each country’s KYC/AML policies to continue operations. The official statement said:
“The most important changes concerning LocalBitcoins’ users will be related to improving the registration of new accounts and the identity verification processes, introducing wallet withdrawal and trade volume-based verification tiers.”
As for trade volume-based verification tiers, the service didn’t specify the exact sums of trading activity that will cause them to apply KYC to users. But this is standard practice when it comes to government control and forced taxation. This can be understood, in some way. But the restriction for wallet withdrawals look scary if we consider that bitcoin is a part of its own economy, not Finland’s.
Do KYC Requirements Increase User Safety?
Since the user has no control over their bitcoin private keys while they’re held on a custodial service, a sudden demand to submit a ton of KYC docs in exchange for your own money may look similar to the intimidations that Poloniex and other big exchanges used in the past.
This is not to mention that Poloniex froze around nine months of ETC transactions without explanation, right before finally implementing KYC requirements. Some other exchanges took similar action, freezing some altcoin transactions for long periods of time without any compensation or explanation.
After implementing KYC measures, however, those exсhanges didn’t make it much safer to hold funds in their wallets. Numerous hacks and dirty inside jobs still fall onto crypto journalists’ desks every day. You can even develop a sample-piece for the kind of news. Just use it for every article about a new exchange attack!
You only need to change the names of the ”hacked” exchanges. And… create clickbait headlines every time. Oh God, thank you for creating Barry Feldman and his amazing cheat sheet:
The ‘Controversial’ BCH Hard-fork Isn’t OK, but ‘Privacy’ Is
Interestingly, during the controversial BCH hard-fork in August 2017, LocalBitcoins was against BCH due to Bitcoin’s ‘superiority‘ in privacy:
The company collected all its users BCH tokens at some point of time, then sold them on open markets for BTC. After that, they credited that bitcoin to users’ accounts. First, such actions didn’t supply users with additional security, they took away a slice of BCH’s liquidity for that moment, as well as leaving users with no ability to withdraw and trade.
Second, three years have passed, and we see that Bitcoin Cash is not some scammy altcoin. It is a serious project with own goals and features. BCH is actually developing as a privacy coin together with BTC, XMR and ZEC. And it has many features to help users hide their transactions, like big blocks, Shnorr signatures, or the incoming Avalanche protocol.
LocalBitcoins Is Slowly Shifting Away From Privacy
In the same time, LocalBitcoins’ service — which would look like it came directly out of the Fellowship of the Bitcoin, now prepares to force people to dump a huge set of personal user data which will be vulnerable to hackers.
In a blog post from March 25th, 2019, LocalBitcoins issued additional information regarding KYC rules. Per the document, “the Act on Detecting and Preventing Money Laundering and Terrorist Financing” will force it to create four individual account levels for user verification. The more data you wish to dump, the higher the “level” you can achieve. The changes will take effect from November 2019.
So, you’d better start collecting your favorite LB traders’ Telegram handles, which is important in the light of numerous attacks on LB and even in terms of the incoming Privacy & Security (destruction) Act by our almighty government.
Want a list of other P2P decentralized exchanges including that ones working without KYC? Here you go.
What do you think about the future of Bitcoin trading? Whether it’s centralized or decentralized one? Share your conspiracy theories in the comments.
Images by Jeff Fawkes
