Account-less crypto exchange ShapeShift has announced it will require customers to create an account and to follow KYC procedures in the future.
Cryptocurrency exchange platform ShapeShift CEO and Founder Erik Voorhees has introduced the company’s new ShapeShift Membership program. The Membership would act as the exchange’s loyalty program, in which clients can receive rewards based on their accounts’ levels.
According to Voorhees, users would receive better pricing and improved user experience as their level increases. Some of the benefits include discounted exchange rates, rewards via ShapeShift’s FOX tokens, and higher transaction limits, among others.
Currently, the Membership is only optional, although ShapeShift will gradually require all its customers to join the program later on.
However, clients must create an account first before joining the exchange’s Membership. This move shocked the community, given that ShapeShift has marketed itself as “the exchange without accounts.”
Voorhees explained that the accounts are necessary to roll out some much-requested account-related features, including records of previous transactions and email notifications.
Membership to Ask for Identification
Another surprising move was the implementation of know your customer (KYC) guidelines on the program. Inclusion to the Membership would require clients to hand over a number of their personal information.
ShapeShift implemented KYC as a response to the current legal status of digital assets like cryptos. Voorhees said that the company must “prudent and thoughtful” on how it moves in crypto’s unregulated environment.
Moreover, ShapeShift explained that the exchange needs the information to be able to offer its services to a number of regions, which have strict rules regarding crypto transactions.
However, Voorhees shared on multiple occasions that ShapeShift did not voluntarily implement KYC guidelines on its platform. Rather, he hinted that the exchange was forced to apply the rules.
https://twitter.com/ErikVoorhees/status/1037540229358309377
Voorhees explained:
“We would prefer if the collection of personal information was not a mandatory element. We still firmly believe that individuals, regardless of their race, religion, or nationality, deserve the right to financial privacy… Such privacy is a foundational element of a civil and just society, and should be defended by all good people. We remain committed to that cause and it is best served if we are smart about our approach.”
According to one study released in June, only 32 percent of crypto exchanges across Europe and the United States conduct identity verification on their customers. Analytics house P.A.ID Strategies studied 25 platforms from both regions and found that 68 percent of the exchanges failed to comply with KYC procedures.
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Mixed Reactions
The news of ShapeShift implementing KYC guidelines has caused a ripple in the crypto community. Many influential figures have voiced their opinions online.
Crypto expert Andreas Antonopoulos expressed his disappointment with ShapeShift. He added that decentralized exchanges, as opposed to ShapeShift, are the way to fight against “surveillance economics.”
https://twitter.com/aantonop/status/1037352527682043907
Meanwhile, blockchain technology expert Preston Byrne defended ShapeShift, saying that the exchange only implemented “a compliance program.”
https://twitter.com/prestonjbyrne/status/1037407629268738048
Coder Udi Wertheimer claimed that ShapeShift has signed its own death warrant by requiring personal information.
https://twitter.com/udiWertheimer/status/1037055976317149185
Legal expert Katherine Wu advised the community not to blame ShapeShift itself, but rather the rules and laws that necessitated the decision.
https://twitter.com/katherineykwu/status/1037315120140099584
As regulating bodies from all around the world scramble to create rules supervising the emerging crypto sector, many observers wonder if other exchanges would implement KYC guidelines in the future as well.
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