Cryptocurrencies

Say “NO!” to KYC

 

Well it looks like Binance KYC information is all over the internet.

I couldn’t possibly provide links to all the articles I’ve read about it, because they are a dime a dozen. In case you somehow missed them all, here is one, just as an example: https://www.coindesk.com/binance-kyc-issue

Let’s get one thing very clear from the beginning: I’m not anti-Binance. As you can clearly see from my previous blog posts and Tweets, I’m actually a big fan of Binance and of CZ. My only real problem with them is their overly agnostic stance towards cryptocurrencies, even the dreaded Libra.

This is also not one of the (many) posts telling you to panic because your data has been compromised. Panic is stupid and never helps anything. It’s far better to remain calm and find a solution to the problem. It would help if Binance was a little more responsive/open about this issue – take note Binance: rapid and truthful PR is essential in such cases. People don’t panic when they know the truth, they panic when they don’t know what’s going on or when they find out that they were lied to.

This post is a reminder of what I warned you about previously, the evils of KYC.

“Try to give you warning, but everyone ignores me.
Told you everything loud and clear, but nobody’s listening.
Call to you so clearly, but you don’t want to hear me.
Told you everything loud and clear, but nobody’s listening.”

~ Nobody’s Listening – Linkin Park (R.I.P. Chester Bennington)

I will be the first to admit that public dissemination of your KYC data was not (and still is not) first and foremost on my list of KYC-related concerns. But: I did warn you about KYC in general, and proclaimed it to be a bad thing, a bad thing which is being done in an even worse way.

I have big issues with KYC. How many of you remember this article?

I wrote it a little over two months ago. Do you remember some of the things which I said in there?

KYC IS BAD FOR CRYPTO”

“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!”

“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.”

I think that the truth behind my warnings is now starting to become apparent. It doesn’t really matter how or why your KYC data was compromised, or even who did it. What matters is that your data was able to be compromised in the first place! Fact: there is no such thing as a foolproof system. This is especially true in crypto, the cryptospace is still new and many loopholes have yet to be found. This will not be the last such incident! We need to eradicate the procedures which leave us vulnerable!

If Binance had not had any KYC data, then there would have been nothing to leak! Yes, I DO understand regulatory need for KYC / AML etc, we’ll get to that later. But first, let’s look at more of what I had to say in my anti-KYC article:

“…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!”

…and leading on from that…

 “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.”

Now this is where regulations and centralised exchanges really start to come into it:

“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.”

“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!

“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.”

A great opportunity which remains a missed opportunity in the cryptoverse, is that crypto projects are failing to leverage the utility that they can provide for one another. I have spoken harshly against projects which insist on using their own KYC procedures and which are not utilising specialist cryptocurrencies designed for that role:

“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.

I have taken such crypto projects on in several private emails and occasional public Tweets – such as this one:

From twitter.com

 

There are exchanges and wallets which I refuse to use because they refuse to use other crypto projects.  I know that in a way this looks like cutting off my nose to spite my face, but if we – the crypto community – don’t take a stand to support ID verification projects and stop the endless and unnecessary KYC procedures, who will?

I also know that some of my favourite exchanges require KYC – some at various levels, depending on what you want from them. Binance, KuCoin, even Nash – all exchanges which I highly recommend – have such requirements. I’m not suggesting that you avoid pro-KYC entities completely, but rather that you start moving in the right direction. For instance: Nash is more decentralised than most exchanges (an exchange is not simply “centralised” or “decentralised”: CEXs and DEXs lie at two ends of a continuum, and most exchanges lie somewhere between those two points), so I will be using it a lot after its August 23 launch and will slowly scale down on using the more centralised ones. Similarly, if given the option (in terms of trading pairs), I choose to use Binance DEX over traditional Binance. As seen in the Tweet above, when an exchange like IDEX takes such a bold move in the wrong direction, then I cut it off completely.

I also included quite a few original Satoshi Nakamoto quotes in my anti-KYC post. People need to be reminded of these regularly! People need to remember Satoshi’s vision!

Satoshi quotes:

“Participants can be anonymous.”

“…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.”

Conclusion

I don’t give a damn that governments want KYC. If you are a large crypto company, and local government regulations are making it hard for you to operate – then MOVE! Don’t try to block users, leave that up to the governments who want to do the regulating. Let people discover the power of the TOR network, VPNs etc. And for crying out loud – stop demanding KYC information! This won’t end well for you or your users!

Let the governments who don’t want crypto seal their own fates. The future of global finance lies in decentralised crypto. If they don’t want to be a part of that future – so be it.

We were lucky with the latest Binance KYC leak, it could have been much worse. Consider this a small taste of what is to come if we continue down the dark path of government-enforced crypto regulation.

To the crypto service providers: I ask you again, with tears in my baby-blue eyes – Use the ID verification projects! Let me login using e.g. Civic. Let me control which information I share with each company. Let me not spread 100 different photos of myself and my identification documents all around the internet!

Simple systems engineering principles are at play here people: you are introducing multiple points of failure – AND THEY ARE FAILING!

Let the KYC we know today die the death that it deserves. It does not matter about government concerns re money laundering, purchases of illegal goods etc. When criminals are selling drugs or guns on your streets, taking away money is not the answer! Yes, without money you can’t buy drugs and guns, but you also can’t buy food, clothing, fuel… The government arguments that crypto transactions are largely in criminal hands are fallacious. FAR more drugs are sold using fiat. FAR more money is laundered using fiat! FORGET ABOUT WHAT GOVERNMENT WANTS! What’s the worst that could happen? They ban crypto? Remind me again how well the drug bans are working after all these years…

Yours in crypto

Bit Brain

“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

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