Why is LocalBitcoins suspending accounts in some countries?
Doing so on the pretext of an enhanced due diligence process, it might have to do with the upcoming crypto regulations
Last month, I wrote about the fate of privacy coins’ hanging in balance with the FATF (Financial Action Task Force) regulation coming into effect in June of this year. According to the guidance, that was first given out in October 2018 & then updated in June 2019 under the auspices of the infamous “travel rule”, countries & Virtual Asset Providers (VASPS) seem to be falling in line with the proposed regulations to avoid any problems with the regulators.
Similar to the FATF regulation, the European Union has issued the Fifth European Anti-Money Laundering Directive (AMLD5), which went into effect on January 10th of this year. The new rules under the strict regulatory regime require crypto exchanges and custodial service providers in the European Union’s 28 member nation-states to enforce a thorough know-your-customer (KYC) and anti-money laundering AML procedures.
Keeping in view these regulatory regimes, Singapore, which has been a popular destination for crypto businesses due to its friendly overtures to the digital assets market has implemented Singapore’s Payment Services Act 2019, which requires cryptocurrency businesses to apply for a license before engaging in “Digital Payment Token” services. Other countries are expected to follow suit.
While some countries & VASPS are beginning to enforce the regulations in letter & spirit, other digital exchanges are either shutting down, delisting privacy coins or moving to relocate to crypto-friendly countries like Panama where barriers to entry are not that stringent. Today’s story is about LocalBitcoins which has suddenly begun to suspend users’ accounts in some countries.
For those who don’t know, LocalBitcoins is a peer-to-peer (P2P) Bitcoin exchange — founded in 2012 and headquartered in Helsinki, Finland, it is one of the most popular platforms of crypto exchange. The P2P exchange is usually considered as a gauge of bitcoin interest & prices around the World. As reported by Forbes, users in Africa, the Middle East & Asia started complaining that their accounts were being deactivated.
Account-holders on the P2P exchange in countries like Afghanistan, Iraq, Nigeria, Syria, and Pakistan recently received a message saying that they could, “ withdraw [their] BTCs by deleting [their] account,” which the users claim they were unable to do — as their accounts got suspended when they tried to access the funds. The message sent out to users said that an “enhanced due diligence process” would now be followed, without giving any details.
Most people are of the opinion that the step was taken to comply with strict regulations enforced in Europe under the AMLD5. This has created ambiguity considering the fact that LocalBitcoins, which had a sound reputation of providing an anonymous platform for exchanging BTCs around the world had previously claimed to have complied with the new legislation early last year.
The regulatory changes have been blamed for a sharp fall in bitcoin trading volumes on LocalBitcoins & other crypto exchanges, some of which are struggling to remain afloat. This lack of clarity on a uniform regulatory framework might result in further confusion on top of the danger of stifling innovation in the nascent crypto space.
Published at Thu, 30 Jan 2020 21:56:18 +0000
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