With the Helsinki-peer-to-peer crypto exchange Localbitcoins now being supervised by Finnish regulators, how will this alter the industry?
The bitcoin trading platform, Localbitcoins, specialises in peer-to-peer and over-the-counter bitcoin exchange in most major cities in the world.
Previously, the Helsinki peer-to-peer crypto exchange was renowned for providing a platform that enabled people to trade and swap fiat for bitcoins or vice versa without any know your customers (KYC) processes.
However, times have changed. Finland’s regulations and new policies have made it trickier for crypto companies to allow trading without verifying the entities involved in the transaction.
On 13th March 2019, the Finnish parliament approved new legislation that gives legal status to digital assets. Furthermore, the country’s parliament also voted in favour of amending the Act on Detecting and Preventing Money Laundering and Terrorist Financing so that it includes crypto wallets and changes under Finland’s AML laws.
Acknowledging these changes, on 25th March 2019, Localbitcoins revealed that they are set to impose stricter AML/KYC guidelines.
The Finnish company says that their company will be supervised by Finland’s Financial Supervisory Authority (FSA), while the Virtual Currency Service Providers (VCSP) Act will provide legal status for cryptocurrencies.
What sort of changes are they proposing?
According to Localbitcoin’s blog post, the VCSP Act “should improve significantly bitcoin’s standing as a viable and legit financial network”.
To coincide with the changes, the trading platform has also launched a new registration process which will still allow people to sign up and start trading on the same day, but will also help eliminate phoney accounts too.
Localbitcoin states that they are “working on improvement measures that will allow us to provide a safer and better service conforming to the regulations.”
“On Monday 18th March, we have launched a new account registration process where users can verify basic information already during sign-up, making it easier for the newcomer to find trading partners from day 1 and increasing the number of suitable customers to advertisers as well as inhibiting the creation of illegitimate accounts.”
The ID process introduces four individual account levels per trade and per bitcoin transaction volume. It’s meant to improve trustworthiness and to make users’ profiles more distinguishable. Details on the separate account verification process for corporate accounts is yet to be released.
These moves should give the company more credibility and help establish digital currencies like bitcoin and ether from a legal and public viewpoint.
It will help make digital currencies become a part of a legitimate financial network and take a giant step towards being recognised alongside fiat as a form of currency.
Doesn’t verifying an account go against the crypto philosophy?
There are some people in the crypto community who believe that these new regulations on ID and AML contradict the purpose of cryptocurrency.
They believe that digital currencies are meant to allow for anonymous transactions.
However, there’s a big difference between privacy and anonymity. Privacy is all about keeping things secure within the crypto ecosystem, while anonymity is a term to describe someone who doesn’t wish to be named or seen.
One thing’s for sure if cryptocurrency is going to continue to grow, anonymity needs to be recognised by all as the danger, not privacy. Regulating and identifying threats is a matter of exposing criminals, not the details of private transactions. Localbitcoin understands this.