Mandatory identity verification on LocalBitcoins is holding back exchanges

Mandatory identity verification on LocalBitcoins is holding back exchanges - localbitcoins

The first day of October, LocalBitcoins, the well-known exchange platform P2P, has proceeded to introduce a change of no small importance. That is, he has made it mandatory identity verification for all users who intend to exchange BTC, with the obvious intent of making the operations that take place on their network ever more transparent.
What was the users reaction? Not really positive, indeed, if you think that in the period elapsed by this innovation LocalBitcoins has registered a decline that reached 25% after the first week. If in the first seven days the exchanges had crossed the threshold of 6mila, in the following weeks they settled around the 4500. Taking the total value traded as a reference, the decline is even more marked, considering how the weekly volume has gone from more than 60 million US dollars to less than 40.

What are the controls introduced on LocalBitcoins?

The controls that have been added on the platform are the verification of the identity of the user (KYC) and those relating to themoney laundering (AML). In practice, those who do not complete the required procedures can theoretically upload purchase orders, but are unable to complete them as they do not have a Bitcoin address. The only way to get around this restriction is to verify identity. The problem does not arise so much in the most advanced countries from a technological point of view, where it can at best cause some annoyance by introducing further steps to bypass, but risks being fatal in developing countries or where there are no precise physical addresses.

Why was mandatory identity verification introduced?

The reason that led LocalBitcoins to introduce the news comes from the fact that the company that manages the platform is based in Finland. Therefore it must necessarily respond to the regulations imposed by the European Union on the subject of anti-money laundering, a subject whose mandatory verification of the identity of users is an integral part.
The new procedural procedure, however, risks being indigestible to those of the virtual currencies who especially appreciate the possibility of enjoy anonymity. However, it should be specified that the problem does not arise in relation to cryptocurrencies, but in the moment of them exchange in fiat uniforms, for which everything must take place in the utmost transparency, precisely to prevent Bitcoin from becoming an instrument for the criminal economy.
Who prefers high levels of privacy until October found fertile ground in procedures with specific cryptocurrency rather than with others, in instruments specifically designed to elevate a sort of protective network around one's identity and techniques such as masking of your IP address in order to prevent the association of a transaction to the device from which it was made. The lack of assured privacy, has led many users to abandon LocalBitcoins, with an impact for now very strong on trading volumes. It now remains to be seen whether over time this share of users will resign themselves to the new situation or whether it will persist in this attitude, which for the platform it could lead to a considerable drop in profits and turnover.