On August 14, 2020, top crypto derivatives exchange BitMEX published a blog post announcing new Know Your Customer (KYC) procedures. The exchange will start implementing the processes towards the end of the month.
Dubbed the “User Verification Programme,” these new KYC requirements will necessitate crypto traders on the platform to upload documents confirming their identity and location.
According to BitMEX, the new user verification procedures would help in the long-term by making transactions more transparent and accurate.
Moreover, adopting such rules would help BitMEX meet the changing crypto regulatory standards and build trust in the cryptocurrency sector. That would then help BitMEX expand into new jurisdictions and avoid conflict with financial regulators.
The adoption of these new KYC rules marks a significant shift in the Seychelles-registered exchange’s libertarian brand. The exchange previously got into trouble with US regulators for allowing Americans to trade futures and other derivatives on the platform.
Arthur Hayes, CEO of BitMEX, tweeted that “the game had changed,” hinting at the inevitability of crypto businesses adopting user identity verification.
Exchanges Worldwide are Adhering to FATF Protocols
BitMEX’s stringent user verification rules come about as a result of pressure from the Financial Action Task Force (FATF), which came up with new regulations to fight financial crime.
The FATF, which is essentially a global anti-money laundering (AML) watchdog, released a new “travel rule” in June 2019. The rule issued various recommendations aimed toward mitigating money laundering and terrorist financing risks associated with cryptocurrencies.
The Travel Rule, which took effect in June 2020, requires crypto transactions above a USD/EUR 1,000 to be accompanied by identifying information such as names, physical addresses, and account numbers.
Since the rule came into action, Hong Kong authorities have moved to adopt the FATF crypto regulations to maintain the region’s status as a leading crypto hub globally.
And with today’s announcement that BitMEX plans to comply with FATF rules, there seems to be a shift in some crypto businesses’ attitudes toward regulating crypto.
To that end, Netherlands-based ING Bank developed a new protocol to facilitate businesses dealing in crypto to adhere to the FATF Travel Rule requirements.
The ING protocol is backed by major players in the global financial sector, including Standard Chartered, Fidelity Digital Assets, and Bitgo exchange.
Crypto Twitter Enraged By Stringent Rules
Crypto exchanges globally are slowly succumbing to pressure from regulators to accept crypto regulation as an unfortunate but necessary condition for the mass adoption of digital assets.
However, stringent KYC rules go against the principle of anonymity that underlines crypto technology, and some in the crypto community oppose such laws.
For instance, a user protested against the recent announcement from BitMEX by tweeting:
“Crypto opened up a front to fight back against encroachment on personal freedoms. One that should be held without an inch of pushback.”
In the face of increased user verification from mainstream exchanges, there has been a surge in the number of P2P trading venues and decentralized exchanges that don’t impose such strict KYC rules on users.
