As the first day of General Data Protection Regulation (GDPR) implementation comes to a close, smaller business owners and investors active within the cryptocurrency scene find themselves coming to terms with a new period of crypto-related commerce, trade and enterprise.
Along with recent EU AML directives now encompassing cryptocurrency, some have expressed lingering concerns on whether or not new privacy regulations would be beneficial for cryptocurrency, while others have yet to form solid opinions on how the industry will change as a result.
The EU is currently ratifying new aspects of the fourth anti-money laundering (AML) treaty, which has heavy implications on the operating procedures of cryptocurrency exchanges, most significantly regarding know-your-customer (KYC) policies.
The KYC regulations will now mandate all customers to submit identification documents such as photo IDs, bank accounts or credit card information, with the goal of providing security from criminal activities.
KYC and AML rules, however, are at odds with the predominant ideology behind cryptocurrencies and blockchain technology, a philosophy of anonymity.
By today, 25 May, every company that you ever bought a product from has probably contacted you to remind you that this is the day the EU’s GDPR comes into force. In essence, the new regulations redefine what personal data means, how companies can use clients’ data, and increases individuals rights on accessing and removing their own information.
They are not limited to companies based in the EU; any company doing business in the EU’s jurisdiction must comply or face a penalty, potentially even a lawsuit. One area particularly affected by these regulations is cryptocurrency exchanges.
UK exchange unconcerned even as GDPR claims first casualties
So, how big are the changes GDPR and AML require from platforms, and what modifications are being made?
In the UK, where a divorce from the EU is expected to finalize in about a year, smaller exchange platforms appeared to struggle to adjust to the new regulations.
Earlier this month, London-based CoinTouch ceased operations due to its perceived inability to comply with the regulations. As a small-scale, decentralized cryptocurrency trading platform, CoinTouch relied heavily on Facebook and Google users sharing their trading history on their newsfeeds.
While this simplified the verification of user’s identities, since the info was easily obtainable from their respective social media profiles, this business model became unsustainable in light of the new privacy requirements.
Not all smaller crypto-related businesses there find this an issue, however.
Marc Warne, CEO of Bittylicious, also based in London, told Bitcoin News that he expected the new laws to have only a minimal impact on traders operating on its platform.
“There is a chance that the AML laws might mean that anonymous users (i.e. users that haven’t formally registered) might not be able to use the platform any longer. This makes up a tiny percentage of users though, and most users do verify their ID as the limits are vastly increased when they do this,” he said.
Warne also felt that that GDPR was unlikely to cause any major disruptions to Bittylicious services despite slight restrictions on what information would be provided by default to brokers on the platform. He admitted that changes were minor and “we already don’t send out newsletters or marketing”, noting that its business activities were already in compliance with requirements of the UK’s Information Commissioner’s Office – which aren’t dissimilar to GDPR.
On whether or not clearer definitions of virtual currency would be beneficial for cryptocurrency, Warne pointed to Japan as a precedent but was not convinced that the industry would benefit:
“Clarification on things such as taxes/VAT is absolutely useful, but companies like Bittylicious exist even if there is no specific clarification. Some argue that there being clarification will allow industries such as banks to be a lot more welcoming to virtual currencies but I do not believe this is the case. For example, in the UK, the government and HMRC (tax authorities) have made it very clear that virtual currencies are just fine, but banks do not allow any company remotely related to virtual currencies to get a bank account.
More mixed reactions to GDPR
Other reactions to the new regulations from the cryptocurrency community have been mixed, with many lukewarm responses indicating that most feel unaffected.
Blockchain technologist Preston Byrne took a lighthearted approach, appreciating his automatic removal from a number of mailing lists.
Some individuals, however, were unhappy to find certain online facilities have ceased to operate in light of the regulations, such as Instapaper, an app for saving web pages on handheld devices, and PICOPS, an Ethereum-backed ICOs assistance service.
As managing partner at Multicoincap, Kyle Samani sees the situation as a chance to pop the adtech bubble, reviewing ad blocking as “the largest boycott in human history”.
It will be interesting to track the progress of cryptocurrency exchanges in the wake of these new regulations, as perhaps they will increase the number of peer-to-peer exchanges over their centralized counterpart.
For now, for smaller crypto enterprises at least, it’s business as usual.
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