by Kai Sedgwick
Customers of Slovenia’s Bitstamp exchange are being forced to jump through hoops to meet an unprecedented level of compliance. A widely circulated image, purporting to reveal Bitstamp’s enhanced KYC procedure, has been attracting a lot of attention. The document requests screenshots of other cryptocurrency exchange profiles, bank account statements showing fiat deposits to third party exchanges, and signed messages from the BTC and ETH addresses the customer intends to use.
Bitstamp Wants to Really Know Its Customers
Cryptocurrency exchanges are obligated to closely adhere to the law in their jurisdiction. Government agencies are inherently suspicious of bitcoin, and regulators won’t hesitate to shut down exchanges that are found to have facilitated money laundering or conducted inadequate KYC procedures. But in their quest to be seen as squeaky clean, some exchanges are asking intrusive and unwarranted questions of their customers, with Bitstamp the most egregious example, as exemplified by a screenshot that reportedly originated from the European exchange.
Bitstamp has a generally positive reputation within the cryptocurrency world. With a pedigree dating back to 2011, the site has been around since the time of Mt Gox, and save for a hack of 19,000 BTC in 2015, has emerged from bitcoin’s wild west days unscathed. Europe’s oldest exchange records close to $1 billion in trading volume each day, with bitcoin, ripple, and ethereum the leading currencies. On the surface, Bitstamp is a model in how to run an exchange, with its CEO Nejc Kodrič lauded for his business acumen and entrepreneurship.
There’s just one issue that keeps dogging Bitstamp, and indeed several other exchanges for that matter: withdrawing and depositing fiat currency is fiendishly difficult. News.Bitcoin.com has previously written about the difficulty of cashing out large amounts of money from major exchanges. The situation was best put by a user in one Telegram trading group, who wrote: “Good luck withdrawing anything from Bittrex, it’s hotel California”.
You Can Cash Out Anytime but You Can Never Leave
It is Bitstamp though which takes the biscuit for protracted and unnecessarily invasive KYC. Thanks to Bitstamp’s radio silence regarding the document at the center of the debate, it is hard to gauge its authenticity. But wherever the document originated, it illustrates two things:
- the lack of communication from many exchanges that allows such rumors to circulate unchecked and 2) insane KYC requests from exchanges have gotten so extraordinary that it’s now hard to tell what’s real and what’s a spoof. What is indisputable is that Bitstamp customers have been aggrieved at the exchange’s KYC policy for months. Bitstamp’s Reddit page features numerous complaints from users, who quote official correspondence that is worded very similarly to the screenshot cited earlier, including the use of phrases such as “kindly ask”. One such missive from Bitstamp reportedly reads:
In order to fully satisfy our additional KYC procedure, we kindly ask you to submit any financial documentation which can confirm the origin of your sent funds, such as savings account statement, salary pay slip, tax revenue statement, investment portfolio, property sale contract, inheritance or similar. Thank you for your cooperation.
To which the user reasonably replies: “All my money is taxed and legal, but I don’t look forward spending HOURS of my time getting my financial documents from the banks, copies of my pay checks from my employer and everything they asked for. It will literally take hours over several days do get what they asked for. What happens if I don’t give them the documentation?”
Cryptocurrency exchanges, either out of fear of being shut down or an overzealous desire to prove they’re above board, have created an environment of fear in which everyone is a suspect and innocence must be proven, not assumed. Faced with onerous and invasive KYC requests which often seem to have no basis in the law, it is no surprise that many individuals are taking their custom elsewhere, be it P2P exchanges such as Localbitcoins.com or to crypto exchanges that treat their clients with courtesy and respect.