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Author Topic: KYC requirement from ICOs will open up a whole news area of scam  (Read 340 times)
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February 14, 2018, 10:23:02 AM
Merited by DooMAD (2), bill gator (1), stomachgrowls (1)
 #1

As the thread subject mentioned, I strongly believe the KYC documents requirement from the ICOs will open up a new area of scam to the world, much larger than the ICO itself.

Reason 1:
The basic idea of crypto currency is de-centralization and anonymity. I understand that ICO will have to comply with the regulatory requirements, but isn't it directly challenging the basic idea of crypto currency? If KYC is required for every ICO, then the whole idea of de-centralization and anonymity is gone. The ICO requirement should be the other way around. Means, every ICO should provide a proper KYC documentation to the public so that investors can be assured that they are not dealing with a bot or a child operating from his home computer.

Reason 2: (this is a big threat)
KYC means "Personally Identifiable Information" and it is a very serious level of data. Most of the governments have a very stringent rules against the breach of PII data, especially in USA. The SSN numbers of USA residents are traded in darkweb for $5-$10 each based on the details available. While most of the ICO owners are not identifiable to public (linkedin and FB profile can't be considered as valid here), they can secretly open up a secondary market for PII data, that will provide them an extra layer to their income. Most of the ICOs are not compliant with the infosec policy of many countries. No one is sure, what is going to happen with their data. It leads to a much larger future scam.

Reason 3:
It provides a big opportunity to the ICOs to deny the bounty hunters from their payment even after their promotional efforts. I am not sure we have already encountered some of these, but I am sure it will happen in future. I have seen no ICO bounty thread mentioned anything about the KYC requirement. There is no upfront communication. However, they may come back saying that KYC needs to be done before the bounty rewards can be released. That's complete miscommunication and cheating. If the ICOs can be upfront on their KYC requirement (which they are not), only bounty hunters and investors will join who can fulfill the requirement. The campaign managers needs to be upfront in this matter.

*While I don't know what needs to be done in order to regularize the first two reason, the third reason can be solved via upfront communication. Please share your thoughts.


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February 14, 2018, 09:09:33 PM
 #2

The solution to the first problem is something that the market -- ie. ICO investors -- need to enforce. If people would actually demand proper documentation instead of simply throwing money at every shiny new project they see this problem wouldn't exist. No documentation, no funding. It could be easy as that, but fact of the matter is that most people don't really care all that much as long as there's a quick buck to be made.

The second problem is definitely the most interesting one. Given how much KYC data is being shuffled around in this space, I wouldn't be surprised if at one point gathering exploitable passport selfies becomes a core part of scammy ICO-based "businesses". I'm pretty sure most ICOs already break a bunch EU regulations concerning the gathering, handling and storing of personal data. But of course preventing possible attempts at small scale money laundering is much more important than protecting the personal data of private citizens. In practice I guess the solution is pretty much the same as with the first problem -- stop throwing money at questionable ICOs.

The third problem is simply scammy behaviour and indeed just needs honest up-front communication.

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February 15, 2018, 12:07:07 AM
 #3

The solution to the first problem is something that the market -- ie. ICO investors -- need to enforce. If people would actually demand proper documentation instead of simply throwing money at every shiny new project they see this problem wouldn't exist. No documentation, no funding. It could be easy as that, but fact of the matter is that most people don't really care all that much as long as there's a quick buck to be made.

The second problem is definitely the most interesting one. Given how much KYC data is being shuffled around in this space, I wouldn't be surprised if at one point gathering exploitable passport selfies becomes a core part of scammy ICO-based "businesses". I'm pretty sure most ICOs already break a bunch EU regulations concerning the gathering, handling and storing of personal data. But of course preventing possible attempts at small scale money laundering is much more important than protecting the personal data of private citizens. In practice I guess the solution is pretty much the same as with the first problem -- stop throwing money at questionable ICOs.

The third problem is simply scammy behaviour and indeed just needs honest up-front communication.


The second part is the major pain area. It is not easy to find a questionable ICO. Every ICO website is listing their facebook and LinkedIn profile details in their website. But that certainly doesn't assure the authenticity of their identity. Creating a fake profile is an easy job but it's not easy to fake a government ID especially when we have scope to verify directly from the government database. Since it is missing, we are not really sure to whom we are giving away our PII data. How they are going to prevent the misuse of that data!!

PII data can be sold in the market very easily. That's where I am very much worried. While majority of the ICOs are scam, how can we ensure that we are dealing with a real company and not with some scammer!!

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February 15, 2018, 09:46:56 PM
 #4

Crypto..so called the world of decentralization and anonymity is now quite a lot regulated by acquiring KYC. I agree with OP that we are providing our most personal and sensitive data to ICO concerns without any authenticated KYC documentation which can lead us to a BIG scam in future.
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February 15, 2018, 10:33:45 PM
 #5

The basic idea of crypto currency is de-centralization and anonymity. I understand that ICO will have to comply with the regulatory requirements, but isn't it directly challenging the basic idea of crypto currency? If KYC is required for every ICO, then the whole idea of de-centralization and anonymity is gone. The ICO requirement should be the other way around. Means, every ICO should provide a proper KYC documentation to the public so that investors can be assured that they are not dealing with a bot or a child operating from his home computer.

While your concerns are valid, they may not be shared by a large number of ICO investors. Ultimately, the free market will decide how to solve this problem. If there are no investors in a project which asks for KYC details, then ICOs will stop asking for KYC documents. We need not fool ourselves that they are doing it only to satisfy regulatory concerns - they always have the option of raising money in a crypto-friendly jurisdiction.


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February 15, 2018, 10:59:45 PM
 #6

The basic idea of crypto currency is de-centralization and anonymity. I understand that ICO will have to comply with the regulatory requirements, but isn't it directly challenging the basic idea of crypto currency? If KYC is required for every ICO, then the whole idea of de-centralization and anonymity is gone. The ICO requirement should be the other way around. Means, every ICO should provide a proper KYC documentation to the public so that investors can be assured that they are not dealing with a bot or a child operating from his home computer.

While your concerns are valid, they may not be shared by a large number of ICO investors. Ultimately, the free market will decide how to solve this problem. If there are no investors in a project which asks for KYC details, then ICOs will stop asking for KYC documents. We need not fool ourselves that they are doing it only to satisfy regulatory concerns - they always have the option of raising money in a crypto-friendly jurisdiction.
I do think most will share those concerns, the third concern is only a problem for bounty hunters and the like, but the first two are extremely important, now investors are forced to identify themselves and the creators of the ico are still in the same obscurity as before, this will create resentment among investors and the second point is the most important, how are the creators of icos going to show they are in fact guarding the information of investors and not abusing it.
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February 16, 2018, 12:49:49 AM
Merited by gentlemand (1)
 #7

This is a very interesting thing to consider. On one hand you have ICO organisers looking to comply with what securities regulators are requesting and making sure that they do not have participants from jurisdictions that have banned ICOs, and on the other hand you have the security of the participants information.

The way I look at it is as another thing to consider when making an investment in an ICO. Would you be happy giving your information to this team? TBH if i didn't find someone trustworthy with my information then I wouldnt be sending them my money either.

I think overall that the introduction of KYC shows that ICO organisers are looking to comply and that is a good sign, of a team that cares and wants to do something so inherently has a degree of trust. But obviously looking further than that is required in the same way that you shouldnt throw money at a project after having watched a 5m youtube clip.

The number 1 thing in the cryptoverse is that your are responsible for your own shit, so take care.
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February 16, 2018, 06:08:37 PM
Merited by BitHodler (1)
 #8

Reason 1:
The basic idea of crypto currency is de-centralization and anonymity. I understand that ICO will have to comply with the regulatory requirements, but isn't it directly challenging the basic idea of crypto currency? If KYC is required for every ICO, then the whole idea of de-centralization and anonymity is gone. The ICO requirement should be the other way around. Means, every ICO should provide a proper KYC documentation to the public so that investors can be assured that they are not dealing with a bot or a child operating from his home computer.

I completely agree, but this is unlikely to happen. If ICOs weren't required to abide by KYC provisions, it could potentially be a hotbed for money laundering, which is already one of governments' biggest concerns with crypto. I'd even go ahead and assume that governments doesn't care as much for their scam potential as their money laundering potential. China likely banned them to prevent capital outflows rather than to prevent scams, for example.

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February 17, 2018, 02:22:19 AM
 #9

China likely banned them to prevent capital outflows rather than to prevent scams, for example.
That. China has been known for acting insanely paranoid regarding everything that concerns capital outflow, and let that be cryptos strongest point. Anyone can move billions in wealth to a different part of the world effortlessly.

One way or another, every country is purely implementing regulations to nurse their selfish hidden agendas. It has nothing to do with protection people and preventing the financing of terrorism and whatnot.

If people seriously believe governments act because they want to protect their inhabitants, they are just dumb. The government doesn't care about what happens to you. It's only out to protect itself from a threat called crypto.

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February 17, 2018, 10:33:49 AM
 #10

Reason 1:
The basic idea of crypto currency is de-centralization and anonymity. I understand that ICO will have to comply with the regulatory requirements, but isn't it directly challenging the basic idea of crypto currency? If KYC is required for every ICO, then the whole idea of de-centralization and anonymity is gone. The ICO requirement should be the other way around. Means, every ICO should provide a proper KYC documentation to the public so that investors can be assured that they are not dealing with a bot or a child operating from his home computer.

I completely agree, but this is unlikely to happen. If ICOs weren't required to abide by KYC provisions, it could potentially be a hotbed for money laundering, which is already one of governments' biggest concerns with crypto. I'd even go ahead and assume that governments doesn't care as much for their scam potential as their money laundering potential. China likely banned them to prevent capital outflows rather than to prevent scams, for example.

Money Laundering is a subjective term. It is basically a way to cover the origin of the fund. It is a method of channelization and filtration of funds which are in question. But why a government is interested to ban money laundering? because it is a tax evasion method. But in the open world economy a person should be the supreme owner of his own funds without having to answer to anyone. Even this is not possible in this strictly centralized economy, but that's the basic idea of crypto currency, De-centralization.

I am sure the government is not worried about the KYC scam as much as they care about tax evasion. But I remember, someone mentioned that, let the free market decide the KYC requirement. If the ICO owners see that people are not investing in an ICO which requires KYC compliance, the owners will eventually move to the crypto friendly territory. But that would take a lot of time before it actually happens. In the meantime, the number of KYC data will flood the black market.

I know most of the people won't take this regulations very seriously because we haven't yet came across any serious and sizable scam by the ICO owners using our KYC data. It will start making sense to everyone, once something like it will happen.

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February 17, 2018, 02:20:10 PM
 #11

Money Laundering is a subjective term. It is basically a way to cover the origin of the fund. It is a method of channelization and filtration of funds which are in question.

How is it a subjective term? You were able to define it clearly and concisely. The origins of the money in question may be legal for all governments care, but money laundering itself is illegal, so there are no gray areas nor subjectivity there. Engage in it, no matter what your reasons behind it may be, and you will be considered a criminal.

I know most of the people won't take this regulations very seriously because we haven't yet came across any serious and sizable scam by the ICO owners using our KYC data. It will start making sense to everyone, once something like it will happen.

I will say it again: I completely agree. Data has a premium nowadays, and it's indeed risky to divulge information to third parties. It's the same problem with other KYC services, who can get hacked and have their customers' info publicized. My point is simply that governments will not care enough to make this one-sided KYC thing happen; it probably should happen, but it won't.

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February 18, 2018, 12:44:19 AM
 #12

I believe that data SCAM is  a possibility but the advantages of KYC and "remove" anonymity from this world is so much bigger that it is worth to risk.

Plus, if data will be sold at market rate 5-10 USD, whilst and ICO can aim at producing even 10-20 millions, selling data won't be more remunerative...   

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February 18, 2018, 02:55:28 AM
 #13

As the thread subject mentioned, I strongly believe the KYC documents requirement from the ICOs will open up a new area of scam to the world, much larger than the ICO itself.

Reason 3:
It provides a big opportunity to the ICOs to deny the bounty hunters from their payment even after their promotional efforts. I am not sure we have already encountered some of these, but I am sure it will happen in future. I have seen no ICO bounty thread mentioned anything about the KYC requirement. There is no upfront communication. However, they may come back saying that KYC needs to be done before the bounty rewards can be released. That's complete miscommunication and cheating. If the ICOs can be upfront on their KYC requirement (which they are not), only bounty hunters and investors will join who can fulfill the requirement. The campaign managers needs to be upfront in this matter.

*While I don't know what needs to be done in order to regularize the first two reason, the third reason can be solved via upfront communication. Please share your thoughts.


As for the third reason, there are already ICOs that are doing that. They would require the bounty hunters to sign up to their site after the ICO because they would send their share of the bounty campaigns in the site's wallet. While the bounty participant is confident that he will be able to claim his bounty share, he is now discouraged if ever he don't have any verification documents for the KYC and there are even some ICOs in which you submitted the right verification documents but still rejected it so he would end up not being able to claim his share which is unfair because the KYC process was not disclosed at the beginning of the campaign.

However, there are some campaign managers that change their mind and did not require the bounty participants anymore to go through KYC process but will just directly send the shares to their wallet. It would be case to case basis then but later on, maybe all ICOs would require their participant to go through KYC process.














 

 

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February 18, 2018, 03:20:14 AM
 #14

Crypto..so called the world of decentralization and anonymity is now quite a lot regulated by acquiring KYC. I agree with OP that we are providing our most personal and sensitive data to ICO concerns without any authenticated KYC documentation which can lead us to a BIG scam in future.

Giving such information can really lead to a scam specially when ICO created for that purpose. We have to be very careful when joining such ICO. This is supposed to be a decentralized market yet since people are trying to regulate such anomaly, cryptomarket are slowly getting centralized.

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February 18, 2018, 07:57:06 PM
 #15

I believe that data SCAM is  a possibility but the advantages of KYC and "remove" anonymity from this world is so much bigger that it is worth to risk.

Plus, if data will be sold at market rate 5-10 USD, whilst and ICO can aim at producing even 10-20 millions, selling data won't be more remunerative...   

What advantage your are referring to?? I don't see any advantage in your opinion. can you please point it out?

As for the third reason, there are already ICOs that are doing that. They would require the bounty hunters to sign up to their site after the ICO because they would send their share of the bounty campaigns in the site's wallet. While the bounty participant is confident that he will be able to claim his bounty share, he is now discouraged if ever he don't have any verification documents for the KYC and there are even some ICOs in which you submitted the right verification documents but still rejected it so he would end up not being able to claim his share which is unfair because the KYC process was not disclosed at the beginning of the campaign.

However, there are some campaign managers that change their mind and did not require the bounty participants anymore to go through KYC process but will just directly send the shares to their wallet. It would be case to case basis then but later on, maybe all ICOs would require their participant to go through KYC process.

Signing up to their website is OK, but asking for the KYC data after the end of ICO, is not OK and I believe it is a non-professional behavior. If an ICO would require their bounty hunters to submit their KYC, they need to be upfront. I still haven't came across any such instances where the bounty reward is denied due to the requirement of KYC data, but if it happens, they need to be tagged. Can you point me out to a list of ICOs those who are following these malpractice or even some reference?


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February 18, 2018, 08:26:30 PM
 #16

if ICO operators want to avoid kyc then all they have to do is hide their jurisdiction. there are still ways and enough willing victims to go for it.

the handing over of personal data is going to be incredibly lucrative on its own. many ico operators have been proven to be completely unscrupulous. no way would any others get my data.

what they need to do is utilise a known and trusted verification platform like jumio to go through, even then i wouldn't be all that keen.
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February 19, 2018, 09:01:39 AM
 #17

if ICO operators want to avoid kyc then all they have to do is hide their jurisdiction. there are still ways and enough willing victims to go for it.

the handing over of personal data is going to be incredibly lucrative on its own. many ico operators have been proven to be completely unscrupulous. no way would any others get my data.

what they need to do is utilise a known and trusted verification platform like jumio to go through, even then i wouldn't be all that keen.

I am sure ICO operators will have to comply with some regulations, but I am worried about the mishandling of the data. Personal Identity market is really lucrative and pretty much active. in darkweb. A central repository like Jumio can be a solution for sure. They also have presence in various countries and the addresses are given in their website as well. That just should not end like Mtgox. First winning the trust of the market then do a scam worth billions.

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February 19, 2018, 10:42:49 AM
 #18

The scams are already happening with decent sizes people take amounts from 5 000 to 30k even 700k $ - bee token allegedly stolen mail list. So don`t give away your ETH guys Cheesy 

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February 19, 2018, 02:21:20 PM
 #19

I am not also in favor of this KYC requirement when joining ICOs. Exposing and submitting your personal data might put a person in a serious security threat. Your personal data can be used for personal gain of other people who handles it. And besides the whole idea of cryptocurrency being decentralized will be set aside.
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February 19, 2018, 02:59:15 PM
 #20

With the advent of services like Onfido and Netverify (Jumio) for ID verification services, most new ICO's are making use of these to verify their customer's ID's which could seem relatively safe but we would still have to entrust our private information with them and the data policies of the countries in which they operate , but it's good to assume that if your data is collected through a Google survey form, like I've noticed a couple of new ICO's and cryptocurrencies doing there's a huge risk of ID data leak and this like you've mentioned is a matter of concern. Also, from what you've specified, most people would be definitely be hesitant to sign up for the ICO's if anonymity is of their importance.

Continuing to this I had a question - If the purpose of collecting the KYC information is to justify a lawful operation of the ICO or their business, then would it makes sense to continue using such 3rd party services to safely collect KYC information and verify them?
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