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Change in Binance KYC Stance Reflects Necessity of Regulation
Binance, the largest cryptocurrency exchange by volume, has had a rough few months recently, with regulators and governments finding fault with its stance on user verification, the services it provides, and the legalities of its operations in jurisdictions around the world. Despite this, Binance remains one of the most popular crypto exchanges - but now it’s having to reassess some of its core values in the face of major opposition.
Founded in 2017 by Changpeng Zhao, until recently Binance allowed users to sign up without KYC, providing they traded less than 2BTC daily. In a theme similar to the early cryptocurrency anarchists, the idea of anonymity (even if that proved to be pseudo-anonymous at best) was often touted as one of the benefits of Binance’s operations - at least for smaller-scale trading.
However, regulations are put in place for a reason, with KYC and AML measures designed specifically to ensure the safety of users’ finances and to hinder or prevent criminals and terrorists from using the financial industry to their benefit; so, when those regulations aren’t upheld rigorously, regulators and others might be concerned that illicit actors will make use of the services in question.
Due to this, Binance’s lack of compliance has led to a number of issues for it in countries across the world. Indeed, back in 2019 Binance had to set up ‘Binance US’ to comply with US regulations after Binance was banned on regulatory grounds (not that things have been plain sailing since then).
Places where stances, warnings and actions have been levied against Binance include the following:
United States console.blockpass.org
As can be seen in the examples above, Binance has been required to suspend or restrict services, faced potential fines, lost ties with financial institutions, or in the case of Ontario has taken the decision to leave the jurisdiction.
In the wake of this blowback, Bianace has since decided to change its stance on regulatory compliance, with an announcement at the tail end of August informing users that: “Effective immediately, all new users are required to complete Intermediate Verification to access Binance products and service offerings, including cryptocurrency deposits, trades and withdrawals.” with existing users’ account permissions being limited to ‘Withdraw Only’ until verification was completed.
This development has also seen Binance providing monetary incentives for people to undergo KYC, with an announcement around the same time saying: “Verify your account and get a 500 BUSD Savings Voucher. From now till September 18, users who complete KYC will receive a 7-day 500 BUSD Savings Trial Fund voucher. At Binance, user security is our top priority towards building a safe crypto environment for everyone.
Doubtless all of these issues and new implementations have led to financial loss for Binance on multiple occasions as they have to suspend services in countries, change the way they operate, or implement new measures; however, this almost certainly also leads to a reputational loss on both sides, with those worried about criminal usage and lack of regulation steering clear of the exchange, and those who wanted ‘anonymity’ lamenting the loss of the services they had been enjoying.
Whilst there isn’t a current method for users to undergo KYC and AML in anonymity, a service such as the one Blockpass provides is still a step in the right direction, with user-controlled identity profiles allowing customers to choose who they share their data with and what data they are comfortable sharing. Through its work with the Blockpass Identity Lab (BIL) at Edinburgh Napier University, Blockpass is also actively investigating compliance solutions which could be both regulatory compliant and also anonymous, harnessing developments in Zero-Knowledge Proofs, Homomorphic Encryption and other cutting-edge cryptographic technologies. Whilst we wait for these technologies to provide new solutions though, we have to accept that currently, the only way for crypto to achieve its full potential is through mainstream adoption - and that requires regulatory compliance, both for the security of users and for the necessary measures it puts in place to stop criminal and terrorist activities.
As for the situation Binance finds itself in now, Blockpass is designed to facilitate this kind of rapid on-boarding process, with pre-verified users avoiding the need for lengthy KYC and AML waiting times. Due to the nature of having pre-verified users and therefore reusable KYC, Blockpass’ solution is not only faster, but also less expensive than alternatives thanks to the huge efficiency it brings. Those looking to onboard new customers - either to their new business or an existing one suddenly facing the need to perform mass-KYC at short notice - Blockpass represents a fast, secure, efficient and affordable option.
The Blockpass platform is fully automated and hosted in the cloud, with no integration or setup fee. Businesses can sign up to the KYC Connect® console in a matter of minutes, test out the service, and start conducting identity documents verification, KYC and AML checks. Sign up for FREE at console.blockpass.org.
By Matthew Warner