The Know Your Client (KYC) element of signing up to a crypto-related website often seems like an unnecessary step, or simply a pain the ass, to many people. But it really is necessary as this week’s news from Cointelegraph explains.
Last week, Bottle Pay, a service that allowed users to send Bitcoin (BTC) via social media accounts, announced that it would have to close due to the EU’s Anti-Money Laundering (AML) regulations. Developed in the UK by BlockMatrix, the company raised $2 million in funding, with the aim of increasing the user-base tenfold over the next year. However, as a UK-registered custodial Bitcoin wallet provider, the company must comply with the European Union’s 5AMLD EU regulation coming into effect from Jan. 10, 2020. We have no idea how the UK’s expected exit from the EU on 31st January will affect firms in the future.
Block Matrix believes that the additional user information the new regulations require would “alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”
Now two other companies have followed suit, namely ChopCoin and SimpleCoin. The former is a crypto gaming platform, whilst the latter is a mining pool. Both firms cite the EU’s upcoming Anti-Money Laundering Directive that would require the firms to adopt Know Your Client (KYC) measures as the reason for shutting down. According to the sites, both will be shutting down within a month.
Simplecoin said in its statement that the EU’s proposed directive would subject its service to a wide range of AML and KYC requirements: “When the laws come into effect, we would be forced to require you, the users, to identify yourselves for anti money-laundering purposes. […] Mining should be available to anyone and we refuse to jeopardise our users’ privacy. It remains to be seen what impact this will have on mining pools and the cryptocurrency space as a whole.”
Chopcoin made a similar statement: “Since we started operating in September 2015 we’ve been giving away approx 30 Bitcoin and introduced thousands of new users to the decentralized revolution. We built a community of dedicated supporters and kept innovating after we pioneered the idea of competitive bitcoin gambling. Unfortunately regulatory concerns and rejecting to force KYC on our users force us to close Chop.”
Ultimately, if you want to keep on the right side of the EU, and you’re a crypto-related business, you will need to follow the AML and KYC regulations, or close.