Every day, without fail, I see crypto supporters arguing in favour of KYC.
KYC does have a place in crypto, but not nearly to the extent that is commonly believed.
Before I get into this post, I have to make a slight detour on behalf of the Americans who may be reading this. Please bear with me:
For the Americans: (generalizations to follow)
I have noticed that Americans in particular are pro-KYC, far more so than other crypto investors. I believe that this is because Americans are largely isolated from the outside world. As a large country with great wealth, American citizens can happily live their entire lives without ever having to leave the confines of their own borders. This is dangerous because it leads to an internalised form of thinking: Americans think that the whole world thinks they same way that they do: they are mistaken. Americans have many wonderful traits, but as a nation, they are the most ignorant people I know of. Nobody else on Earth can understand how a national sports competition can be named “The World Series”. We shake our heads in dismay when we see Americans unable to point to places like North Korea or New Zealand on a map. Americans think that government everywhere is like government in the USA: from what they say, it is easy to discern that it does not even occurto them that this is not so. This is not a dig at the citizens of the USA, it’s a free bit of Bit Brainian advice and a wake-up call.
Your leaders and government are not the all-powerful gods they make themselves out to be. Your various federal institutions have only got regulatory authority as far as your borders extend. Your fear of your own internal institutions such as the SEC, the FBI, the NSA etc. is rather scary – it’s reminiscent of totalitarian centralised powers such as North Korea. You’re probably not alone in this, I’ve seen Germans similarly scared of their government officials – nobody will ever say “boo” to a cop or even a train conductor in Germany!
I’m not saying that you should hate your government agencies or that you should oppose anything the state does; I’m suggesting that you broaden your mindset to realise that your government can’t be allowed to control every aspect of your life, that it has limits, and that you as a human being have a right to stand up for what is yours and to oppose any form of oppression. Your government is only one of over 200 governments on Earth, don’t let it make you think that the whole world plays by American rules – it doesn’t.
Now that I have dealt with the issue of American mindset (I hope that helped one or two people, possibly even some non-Americans who experience something similar where they live), let us return to the issue at hand.
Here is the truth about KYC:
KYC IS BAD FOR CRYPTO
I realise that your knee-jerk response to that may well be to think that I am wrong. Think about that for a moment… Bit Brain being wrong? Come on! You know that doesn’t make any sense!
KYC IS bad for crypto. Because I realise that many of you can’t see it for yourselves, I will tell you why I say that.
At the moment KYC is a necessary evil. If you are anything like me, a crypto investor who invests all over the place, then you will know what a painful process KYC is to complete over and over again. I recently registered with TenX to claim my TENX token airdrop. It was absolutely painful and very annoying. Similarly, I had to give Binance more information after their recent hack, including installing a phone app which I didn’t want. I have noticed that recent KYC processes are becoming far more thorough, and hence more painful, than older ones.
On the face of it it’s hard to even understand why any crypto supporter is not automatically against KYC.
KYC obviously stands against some of the very principles that crypto is built on!
The ability to transact with anyone, anywhere, anonymously is a core concept built into the crypto way of doing business. The matter of asking someone for their identity before agreeing to carry out crypto transactions with them should never even be raised!
Listen carefully: Do you remember why we have crypto? Do you remember what prompted Satoshi Nakamoto to write the Bitcoin Whitepaper?
Existing systems have failed us! Fiat systems base their trust on individuals and being able to identify those individuals. Those systems have already proven their inability to operate properly. Crypto was based on a zero-trust model which uses cryptographic methods to ensure trust. IT DOES NOT NEED INDIVIDUAL IDENTITIES IN ORDER TO FUNCTION!
A crypto system which demands the identities of its participants is a self-destructive system. It unbalances crypto as a whole and works against the principles on which crypto is built. Think about it: if I need to identify myself in order to make a crypto transaction, why would I not just use a fiat one instead? Either way I’m going to have to comply with regulations. Either way I’m going to end up paying taxes on it. Either way my identity will be known. What KYC does is to strip the usefulness away from crypto, thereby undermining its value and making it not worthwhile investing in!
If government can track my crypto investments as easily as it can track my stock exchange investments, then I might as well just buy shares. If it taxes me on crypto airdrops like it taxes me on dividends, then what benefit is my crypto to me? If my crypto has no benefit to me, then my crypto has no value to me. Then it’s just another unbacked, regulated means of exchange. I have no need for another one of those, I have enough trouble with fiat money as it is.
Think carefully before supporting KYC, because what I describe above is the logical conclusion of what you are supporting. Bit Brain has spoken.
The need for KYC
Let’s look at the other side of the coin – why we do need KYC.
Let’s say I want to purchase something online – a nice new Ledger Nano X hardware wallet for instance. I could use fiat money, or I could use crypto. While it is a great store of value, crypto is also supposed to be a means of exchange. If we never spend our crypto, then why hold it? So for this example, let’s say that I choose to pay for my Ledger with Bitcoin. I place my order on their website, but I need to pay for it. Unfortunately for me, many other crypto enthusiasts are placing their orders for Ledger Nano X’s at the same time and are also choosing to pay with Bitcoin. I can’t just go and dump 0.02 BTC (or whatever they cost) into Ledger’s wallet and then say that I’ve paid for it. They need some way to link my order to the Bitcoin address that they received funds from.
For reasons such as this, KYC becomes useful in crypto transactions. While many transactions don’t require it, many others do. I DON’T agree with KYC procedures which exist to placate the demands of centralised entities, but I do agree with identification procedures that are required to carry out basic business transactions. Not all crypto transactions have to be anonymous.
I was a little harsh on TenX earlier, I actually don’t blame them for their procedures. Due to the rather specific nature of TenX – a crypto which by design is directly linked to centralised banking procedures (Visa), they have to have that kind of KYC procedure (annoying as it may be) or they would not be able to issue their TenX cards. But this only applies to very few crypto companies, in most cases this should not be a factor. Centralised crypto exchanges in particular are starting to look more and more like banks (as mentioned by Heidi in her Monday “Crypto tips” video https://www.youtube.com/watch?v=91f-QNSmzrA&t= ). Let’s be very clear here: an exchange does NOT require your name or phone number to change one coin into another!
Regulatory authorities are going to do everything they can to control crypto, that was alwaysgoing to happen! Regulation does not serve you if you are a responsible crypto user. Your private keys secure your funds, you don’t need a central authority to protect you! You have to oppose and circumvent such regulations at any or every opportunity. If you allow draft bills like this Texan one to come into effect, then you are shooting yourself in the foot. By the way, that bill would prohibit you from accepting crypto from someone you can’t identify. As a crypto user I can assure you: if you demand proof of my identity before I can send you crypto; then I won’t ever be sending you any crypto! Stop helping the regulators, they want to kill crypto! Don’t be lazy, look after your own cryptos and fight for a decentralised future! If you are going to let the SEC tell you which crypto tokens you may or may not earn, then you are going to be stuck in the same old wealth trap that fiat money has created for you.
There are a few ways around the KYC problem. For those stuck under authoritarian rule, I suggest using VPNs and other techniques which I have already described to you in the past ( Flying under the radar ). To solve the issue of identifying yourself without giving away your names, surname, address, phone number, copies of your passport, recent photographs, proof of residence etc, we need to all use the existing cryptocurrencies designed for that purpose. We have an array of already working and under development Identity Verification cryptocurrencies available to us: Civic, THEKEY, SelfKey, Worbli, NEO ID etc. We as crypto users need to put pressure on crypto companies to use these services. We need to support those who already use these services and demand that the others do the same. Using an Identity verification service means that you go through KYC procedures only once. Thereafter, anyone who needs proof of your identity has to deal with Civic or whomever they have signed up with. A properly designed system won’t just give anyone and everyone all your details either, they will only be given what they need and what you consent to provide them with. So in the example where I buy my Ledger, perhaps they will only get my Bitcoin address, email address and postal address – all they need to confirm payment and send me my product.
Users need to be able to select when, where and to whom they submit KYC-style information. Identification Verification services offer this. Other useful crypto technologies in this regard include the choice of fungible or non-fungible tokens and also privacy coins which can be set either to private or to public mode (such as ZCash).
I tell you again, there is no need to keep submitting your identity to everybody or to comply with autocratic regulations – crypto does not belong to any government and they have no right to say what you may or may not do with it!
This paragraph has nothing to do with Bitcoin SV (especially since Wright seems to want to comply with government regulations! – I guess that proves beyond a doubt who he is not!)
I think that many of you are desperately in need of a reminder of what Satoshi’s Vision was when he created crypto. You need a reminder of what crypto really is, why it exists and what it stands for. For the rest of this section, I will post quotes by Satoshi:
Lets start off with a reminder of why we have Bitcoin in the first place: the failure of centralised monetary entities:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
~ The Bitcoin Genesis Block
The main properties:
Double-spending is prevented with a peer-to-peer network.
No mint or other trusted parties.
Participants can be anonymous.
New coins are made from Hashcash style proof-of-work.
The proof-of-work for new coin generation also powers the
network to prevent double-spending.
The following quotes all come directly from the Bitcoin Whitepaper:
A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a
…With the possibility of reversal, the need for trust spreads. Merchants must
be wary of their customers, hassling them for more information than they would otherwise need….
…What is needed is an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party. Transactions that are computationally impractical to reverse would protect sellers
…privacy can still be maintained by breaking the flow of information in
another place: by keeping public keys anonymous. The public can see that someone is sending
an amount to someone else, but without information linking the transaction to anyone.
We have proposed a system for electronic transactions without relying on trust.
I’m supporting Satoshi’s Vision for cryptocurrencies, what are you supporting?
The process of KYC is, by its very nature, anti-crypto.
Dealing in crypto is not the same as dealing with fiat based assets, crypto is not linked to government assets and governments have absolutely no right to attempt to regulate it. One of the greatest attractions of crypto is that is is beyond the reach of regulations, if crypto is to succeed then it needs to remain that way! Don’t let your own government fool you into thinking that you have to play crypto by their rules, you don’t. Find a way around the rules. Crypto is decentralised, it is designed to to able to avoid such regulations! Giving in to regulations and supporting them is akin to driving a knife into crypto’s back, get out of the crypto space if you want to be like that, it’s counter-productive and will devalue the very asset which you are investing in.
KYC is part of the slippery slope to crypto regulation. I stand strongly against it.
Show me the government argument in favour of KYC and crypto regulation, and I will show you the counter argument that disproves it.
Yours in crypto
“The secret to success: find out where people are going and get there first”
~ Mark Twain
“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful”
~ Bit Brain