ShapeShift, KYC and ‘anticipatory compliance’
We’ve always been careful not only to comply with existing regulation, but also to take a forward-looking approach that anticipates what requirements might reasonably be made in the future. That way, we’ll already be compliant when they happen and can continue to scale without delay.
Instant cryptocurrency exchange ShapeShift has controversially started to collect user identity information, much the same as traditional exchanges do. The reasons for this move by an industry leader are instructive for Incent and the whole crypto sector.
ShapeShift’s model sets it apart from other crypto exchanges like Bitstamp, Bitfinex and Kraken. Instead of offering a trading platform that pairs buyers and sellers directly via an orderbook, the app makes switching between one crypto and another as fast and easy as possible. The user sends one crypto (e.g. LTC) to a wallet address designated by ShapeShift and receives the coins they are purchasing (e.g. DOGE) directly to their wallet. ShapeShift doesn’t hold or control customer balances since the whole process is more or less instant.
Despite this, ShapeShift have taken the move to require users to register for KYC purposes. Many crypto purists — libertarians who dislike any unnecessary government interference — assumed the decision was a result of threats from regulators. Not so: CEO and founder Erik Vorhees recently confirmed it was a proactive step designed to reduce ShapeShift’s legal risk.
This is particularly significant since Vorhees has been and continues to be an outspoken libertarian and advocate of privacy rights. Nevertheless, ShapeShift is a corporation and must abide by the relevant laws. It has not yet come under pressure from regulators, but Vorhees apparently saw the writing on the wall: in order to continue to provide that service unimpeded for the foreseeable future, he judged it wise to implement KYC measures.
Forward-looking compliance
Regulation inevitably lags behind the technology. Bitcoin (and later ICOs) existed for years before regulators started to take an interest. But we also know that regulation will come — and when it does, businesses that haven’t prepared for this reality risk being left behind. This is why Incent made the effort to register with AUSTRAC, the Australian government’s financial intelligence agency, and ensures that itwe compliesy with official anti-money laundering and counter-terrorist financing regulation.
We have always been clear about the need to verify users’ identities and collect KYC information. Not only is this required by regulators, or is likely to be required in the near future; it allows us to enhance platform security, protecting our users, and to provide a better user experience and more useful service.
Users can always withdraw their Incent tokens from our platform, subject to verifying their accounts. After that they may transfer them freely within the blockchain ecosystem. Where they wish to interface with the conventional financial system once again (e.g. when depositing to an exchange) they will almost certainly have to provide KYC information once again.
In short, we’re encouraged that Erik Vorhees and other leaders in the crypto world have taken these steps, ensuring that their services stay ahead of emerging regulation and positioning themselves intelligently for a future in which cryptocurrency finally becomes an everyday reality.
