A cryptocurrency exchange has imposed tight restrictions on coin withdrawals. What are we talking about?
New customer service terms are being introduced for users of Dutch cryptocurrency exchange Coinbase. According to the platform’s official announcement on its blog, starting Monday, the aforementioned category of traders will have to undergo a new identity verification procedure (KYC) when sending crypto to off-exchange addresses. In general, users will have to provide the full name and address of the recipient, as well as the reason for the transaction. Naturally, such has become a cause for criticism of the platform, which is essentially complying with local legislation. We explain the situation in more detail.
It should be noted that cryptocurrency platforms in general do not particularly value anonymous cryptocurrencies due to possible problems with the government. Another proof of this came in the first half of June 2022. Then it became known that South Korean cryptocurrency exchanges represented by Upbit, Bithumb, Coinone, Korbit and Gopax were delisting LightCoin, i.e. getting rid of the digital asset on their platforms.
The reason for this is the relatively recent integration of the cryptocurrency’s MimbleWimble privacy protocol, which is aimed specifically at anonymous transactions. At the same time, the legal framework in the state prohibits anonymous transfers – hence the desire of the platforms’ employees to avoid possible mishaps with the authorities.
LightCoin and cryptocurrency creator Charlie Lee
However, the current example of restrictions has turned out to be even stranger.
How authorities are struggling with anonymity
According to Cointelegraph sources, the change will only affect users from the Netherlands. It is being introduced to comply with the country’s financial regulators’ rules on digital assets. It turns out that non-custodial cryptocurrencies are subject to the Sanctions Act 1977, which requires financial service providers to verify the identity of individuals or entities with whom they have a business relationship.
Such a pretext seems ridiculous, because in 1977 cryptocurrencies were not even discussed. Well, in this case, officials have once again affected their reputation, as such restrictions are unlikely to please local fans of digital assets. Then again, regulating the new blockchain and cryptocurrency industry with a 45-year-old law is simply stupid.
Coinbase
As a reminder, Coinbase officials announced in March that the platform would track transactions outside the exchange in Canada, Singapore and Japan, citing compliance with local jurisdictions. The maximum threshold for Canadians without having to undergo additional confirmation of identity was set at $801, but users in Singapore and Japan will have to report each transfer outside the exchange.
Read also: Securities commissioner suggested that bankrupt cryptocurrency companies should not be bailed out. But why?
In general, regulators – and in particular the US Securities and Exchange Commission (SEC) – sometimes apply double standards in controlling the crypto market. This statement was made the day before by Ripple CEO Brad Garlinghouse. He referred to Ripple’s ongoing litigation with the Securities and Exchange Commission, in which the regulator accuses the company of “offering unregistered securities”. That said, the SEC at the same time still approved Coinbase’s IPO last year. Here’s the relevant quote from Brad.
The SEC now seems to believe that “XRP is and always has been a security”. But they have also approved Coinbase to go public, although Coinbase is not a registered broker-dealer.
Ripple CEO Brad Garlinghouse
Garlinghouse is outraged that the Commission is allegedly too negligent in carrying out its duties regarding the crypto market. He continues.
Instead of doing the hard work of defining a new set of clear rules and regulations, the Securities and Exchange Commission is enforcing controls, which is ineffective and, in my opinion, stifles innovation in the United States.
Indeed, the current restrictions from regulators actually hinder the development of digital assets. Although, as experts in the blockchain niche believe, clear and comprehensible rules for interacting with coins would be a reason to connect a significant number of new users to the industry.
US Securities and Exchange Commission
We believe that the desire to destroy user privacy because of a law from 1977 is absurd, and the government must understand this. The old regulations are not suitable for a new and constantly evolving asset sector. Sooner or later the authorities will have to recognise this fact and work hard on a new regulatory framework.
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