A new study by the on-chain analysis company CipherTrace found that most of the Know Your Customer (KYC) processes on Bitcoin and crypto exchanges can be exploited by money launderers, criminals and extremists.
Just recently, the founders of BitMEX in the US were indicted in a landmark case.
Not only stock exchanges in the USA, Great Britain and Singapore require KYC
According to CipherTrade, over 56% of all cryptocurrency service providers such as wallets, currency exchanges and others worldwide have a „weak or porous“ KYC process. The metric means that criminals and money launderers can use such services to deposit or withdraw their ill-gotten funds with very little to no KYC.
Companies in the USA, Singapore and Great Britain are leading the way, according to CipherTrace – despite the strict financial regulations in the three regions.
„Although these regions generally host a higher volume of crypto service providers, the large number of VASPs in these countries that require little to no KYC shows how easy and extensive potential exit options are for money launderers,“ the report said.
According to the analysts, more than 60% of the 10 “worst KYC countries” in the world are in Europe, 20% in Latin American and Caribbean countries, and the last 20% in APAC countries
Due to strict, or rather, non-existent regulations regarding digital currencies, most crypto companies are forced to operate in opaque countries and to open accounts in a tax haven like the Cayman Islands.
Laxes KYC, however, means regulators can still catch users and charge business owners with fees – as evidenced by yesterday’s regulatory move against BitMEX.