dismiss K.Y.C.
What is KYC?
KYC or ‘Know your customer’ is a regulation that any businesses with a banking relationship has to abide by. Bitcoin exchanges are no different. These rules are imposed worldwide and are geared towards ensuring that a business acting as a money exchange and/or transmitter has ‘suitable’ information on every customer they serve.
Within the Bitcoin space, ‘creeping KYC’ is a disease that is slowly spreading. If you purchase through one of these regulated entities, you essentially tag your bitcoin addresses to your personal identity. This makes it trivial for chain surveillance firms, the companies they work with, or worse, governments, to potentially…
- Track your spending habits
- Prevent you from using other regulated services
- Confiscate your bitcoin
- Come after you for tax liabilities
- Generally know more about you than they should
We get it, auto DCA from a Bitcoin only company makes ‘stacking sats’ super simple and easy. We aren’t saying these companies are bad actors, far from it. We merely want you to think about what you have to give up or risk for this simplicity. Read on and come to your own conclusion…
What information will I have to provide?
To buy bitcoin from a KYC exchange, users will need to provide personal information. How much you need to supply varies from one to the next, some may require a simple name for small amounts (you could easily supply an alias) and others may require them all. Most will ask for any combination of the following…
- Name
- Address
- Phone number
- Drivers license
- Government ID
- A selfie holding a piece of paper with the name of the exchange and the date
- A video call with the exchange
Why is providing this information a risk?
Data leaks
KYC information ties your personal identity to any bitcoin you purchase. The exchange knows…
- How much you bought
- When you bought it
- Your banking information
- Where you withdraw to
A central party holding millions of people’s sensitive and personal information creates a huge honey pot at risk of being stolen due to incompetent security practices at some of these companies. How would you feel if your name, address, photo and exactly how much Bitcoin you own was stolen from an exchange and being sold to the highest bidder on a darknet market? This sounds like scaremongering but data leaks happen all too often!
Censorship
Most of these exchanges work, in some shape or form, directly with chain surveillance firms (and some, directly with government agencies!) to remain compliant in their chosen jurisdiction. The completely transparent nature of the Bitcoin blockchain means that anyone with the correct toolset (such as a chain surveillance firm) can follow your activity. If you withdraw to, or deposit from an entity that the exchange does not like, they can freeze or even close your account. Not exactly fitting with the censorship.
6102 type order
Executive Order 6102 is an executive order signed on April 5, 1933, by US President Franklin D. Roosevelt “forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.”
If the government in your country were to exercise a similar order against Bitcoin, anyone who bought bitcoin via a KYC source would be an easy target for confiscation. The excuse that you ‘lost it in a boating accident’ isn’t going to get you far when under duress from a three letter agency. Tax agencies worldwide put the onus on the individual to prove innocence, it isn’t for them to prove that you haven’t paid tax.
Not to mention the fact that they will know the addresses you withdrew to and could watch those for any movements (The blockchain is completely transparent don’t forget).
