One of the biggest exchanges, surpassing US-based Kraken in monthly visits, KuCoin has announced that its users will be required to register personal information to comply with international crypto Know Your Customer (KYC) rules.
This comes at a time when the European Union is putting forth regulations that would require trades between private wallets and corporate wallets to carry KYC data. The regulations are meant to combat criminal activity and the trade of illegal substances.
With international exchanges and governments pushing personal verification to complete crypto trades, what will happen to the future of crypto? Will the digital asset market see a decrease in interest due to the diminishing inherent anonymity factor that came with crypto in the first place?
KuCoin, a long-standing, reputable crypto exchange shocked the world when it announced that it will require users to provide personal information to continue using essential services provided by the exchange.
The announcement stated that users will require customers to present verification data, including Photo ID and facial recognition data by July 15 to offer the full extent of the exchange’s services.
“In order to comply with the “Know Your Customer (KYC)” principle, further implement relevant legal and regulatory requirements, enhance the security level of user accounts, and better combat money laundering, terrorist financing, and other illegal and criminal activities, KuCoin will upgrade its customer identification and verification procedures starting from July 15, 2023 (UTC).”
New users to the platform will also be required to provide personal verification data to access the full suite of services on KuCoin.
Users who fail to provide KYC information will access services limited to services “such as spot trading sell, contract liquidation, margin liquidation, financial redemption, ETF redemption, and will not be able to use deposit services.”
The company explained its decision by stating that “KYC can effectively reduce fraud, money laundering, and terrorist financing, amongst other malicious activities. KuCoin has also added the ability for KYC verified accounts to enjoy a higher daily withdrawal limit.”
Users who provide facial recognition data will enjoy the maximum withdrawal limit on KuCoin of one million USDT per day.
A spokesperson for KuCoin stated in an interview that “KuCoin doesn’t support the United States KYC based on our current KYC or the updated KYC rules,” which leads to the assumption that KuCoin is complying with KYC rules in other markets, such as the EU and Hong Kong.
Speaking of the EU, the European Parliament has already signed off on an agreement that would require certain crypto transactions to carry information on senders and receivers.
“The so-called ‘travel rule’, already used in traditional finance, will in future cover transfers of crypto assets. Information on the source of the asset and its beneficiary will have to ‘travel’ with the transaction and be stored on both sides of the transfer.”
“The law would also cover transactions above €1000 from so-called self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers. The rules do not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.”
Although probably not the driving force behind the decision, it would be remiss not to note how that would influence Binance, the world’s biggest exchange already facing a European exit.
Binance is currently facing numerous lawsuits filed by the SEC for accusations such as wash trading, comingling of customer funds, and evasion of US regulators. Ironically, these accusations would not have taken place had the platform been under KYC regulations.
However, one of the founding pillars of crypto – when Satoshi Nakamoto first created Bitcoin and blockchains – is total anonymity and control over private information. So, where does that lead the industry?
Crypto and other digital assets have been at the center of many scandals since the technology was popularized, from FTX to Celsius, to Silkroad. The anonymity and ease of use provided by the technology are most likely what attracted most enthusiasts to the new era of finances in the first place.
Now, with governments and even private companies such as KuCoin forcing users to hand in personal information to access the technology, a huge part of the technology’s allure is diminishing.
However, cryptocurrencies, especially Bitcoin and Ethereum have evolved beyond what they were initially intended for. The blockchain technology created by Nakamoto is now used around the world to keep data secure. Software developers are using Ethereum blockchains to enable creators to control the value of their creations.
Granted, being able to commence commerce and trade completely decentralized from governmental control is the future many enthusiasts were looking forward to. But, unfortunately, a technology that enables individuals to move unsurmountable amounts of money completely unregistered will eventually lead to an abuse of power and funding of undesired outcomes.