When cryptcurrencies exchanges have more than money in custody

When cryptcurrencies exchanges have more than money in custody

Each of the following stories in Asia are significant, but when you read them together, I’m talking about a bigger, global story.
First, on January 23, South Korean financial authorities set the date for the introduction of new rules banning the anonymous crypto account. Or, as he prefers others to say, “I’m asking for customer identification for trading accounts from cryptomonas exchanges.”
Just the following day, a different South Korean agency fined a large portion of cryptomontage exchanges for failing to secure customer data. “Security threats, such as virtual currency speculation and attacks sites that work with cryptomones, are rising. The on-site situation of protecting customer information in cryptomonade exchanges is very poor, “the director of the Communications Commission of Korea warned when he announced he would be fining.

In spite of this, on January 26, Coincheck, a Japanese crypto exchange, admitted that it was broken by hackers. They were robbed of XEM (one of the mid-size cryptomonas on the exchange) worth more than 533 million dollars.

Let’s look at it a little. These two events remind us that:

International authorities are worried about money laundering and financial crimes. Seek to ensure that cryptomonas exchanges, like all financial intermediaries, know who they are. Depending on how much a client is trapped by a client, the exchanges must collect all sorts of personal identification information. Real name, address, a copy of your passport, even a portrait picture.

The exchanges are not too talented to secure this personal data. Which is not a surprise, because …

It does not even secure client funds with too much talent.

Expert criptomone users will tell you that you should store a large part of your coins and use cryptomonal exchanges only for the amounts you are actively traded. However, the first two observations present a more confusing problem.

Briefly, the combination of the two information shows that there is tension between complying with anti-money laundering laws and customer knowledge on the one hand, and securing data on the other.

There is no easy solution

There are all kinds of ways to solve this conflict.

Revision of anti-money laundering laws. Weak chances.

It’s not that they should not be studied in more detail. The Libertarians who adopted early bitcoin exaggerate when they say that “money laundering is not a crime.” In other words, covering a crime is in itself an offense. Should it be considered a crime to hide activities that are not illegal and do not harm anyone, just so that things are more convenient for law enforcement?

Some would say the answer is yes. If you do not know what “lethal” money laundering is, you lack creativity. Many very ugly things are happening, even if we exclude offenses without victims. Policymakers need to ask their question more often and look for a more detailed answer.

But you should not expect major changes in the political climate of Sept. 11, Charlie Hebdo, San Bernardino, and other tragic events.

Exempting cripto businesses from AML legislation. Joke. Read above

Requirements for exchanges to develop cyber security

You can say what you want about Benjamin Lawsky, but the former regulator for the American state of New York and the architect BitLicense has recognized the importance of well-established security practices for digital custodians. In fact, the strict cyber security standards it has written for cryptomonas firms are so controversial because they were later imposed on the traditional financial institutions of the New York Financial Services Department.

It is very true that BitLicense was not exactly an absolute success. The institution has issued four licenses in total since the new rules were implemented in 2015. Most cripto launchers have simply avoided doing business with New York or have balanced out of regulation, pretexts. They have not mentioned anything about the cyber security requirements, because they do not like to admit they are not able to comply.

The situation resembles the order of “collecting and storing nuclear waste, and doing well to secure it.” More creative solutions would be needed.

In other words, we need to find a way to reach your goal, to fight criminals, without forcing businesses to store all this data.
There are, for example, adjacent ecosystems made by digitization startups and open-source projects that create safes for personal data and reusable electronic bulletins. Although the patterns vary, the common ground is that if you give the keys to your identity to every stranger you do business with, you can show them that they can access a particular resource.

For example, a club gendarme must make sure you are over 18 years old. There’s also no need to know the exact date of birth. In the same style, if you can show that you are not on the Treasury’s list of sanctions, maybe you do not have to pass a passport copy and an invoice to your name.

The point is, not everyone you do business with must know who you are, as long as someone knows who you are. Authorities can track blockchain transactions up to an exchange and eventually identify a vendor identifying users under court order.

It is an improvement of the situation. However, the real-world application was rare.

You can also say that if you put these rules into practice, the identification solutions we talked about is just a remixing of the same books.

Even if these electronic bulletin providers are confident, who knows if they would insist on seeing a renegotiation mandate before they give the data to the governments? It is hard to trust that governments will now respect their constitutional limits of power. With presidents like Donald Trump or Vladimir Putin and with premiers like Theresa May, we should worry.

It remains to be hoped that the development of decentralized exchanges will solve the problem, at least in terms of digital goods transactions. Until then, be vigilant and protect your money, personal data and civil losers.

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