Localbitcoins, one of the oldest Bitcoin exchanges running, is going to change its verification process. This is due to pressure by the EU and local regulators. The new anti-money laundering (AML) and know-your-customer (KYC) policies are part of an EU-wide push against terrorism financing and money laundering.
Localbitcoins has been pressured by the entire EU, all their financial watchdogs and most of all by the FSA. The Finnish Financial Supervisory Authority (FSA) has recently introduced a new law governing electronic currencies. This law is called the Virtual Currency Service Providers Act. It closed any loopholes relating to virtual currencies and brought them into line with the 5th anti-money laundering directive. This directive, issued by the EU, must be followed by all member countries.
The law requires all cryptocurrency businesses within its jurisdiction to carry out customer due diligence (CDD) and to immediately forward any suspicious activity reports (SAR). It also requires any business that offers cryptocurrency to its customers must obtain and verify their identities and addresses. Further, it makes it mandatory for any exchanges and wallets to register with the FSA.
The venerable exchange released a blogpost on the 25th of March. In this post, they stated that they had already launched a new account registration process. This process would allow users to verify basic information during sign-up. This, they said, would considerably shorten the time needed to verify its clients.
The company also promised to make its platform a safer and better service. This was to be done in accordance with the new regulations that had been laid out by the FSA. They also stated that they would separate the accounts into four different levels. Two would be based on a per trade and Bitcoin transaction volume level. Two more for corporate accounts, which would undergo a separate verification process.
The finished the blog post on a positive note, stating that their belief that the changes to their policy will help legitimize the entire crypto industry.
While the verification is not a big issue for many users, the fact that anonymous in-person trades will no longer be allowed is definitely a blow. It was one of the key features and a big reason why many people decided to use Localbitcoins platform.
Industry stakeholders and consumers alike have expressed that conforming to the new regulation is a step back for the company, as many of the clients were there for that reason. Following the announcement on the 25th, there was considerable chatter over social media on what people would now that anonymity was no longer guaranteed by the exchange.
Proponents of the move, however, say that they support such actions. It is because of the anonymity that criminals have been the largest users of cryptocurrency by far. The regulation and following regulation will give crypto a boost. The boost in legitimacy and mainstream appeal will bring more entrants to the field and help improve the technology as a whole say industry experts.
However, with its userbase divided, Localbitcoins did admit it needs to step up its game in the future.
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