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Author Topic: Bitcoin, KYC, Unbanked  (Read 105 times)
krishnapramod
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May 11, 2018, 11:49:35 AM
 #1

Read an article on Medium, don't think it's going to get much claps, but the subject is a bit thought-provoking. About two billion in the world are unbanked and the major use case of Bitcoin is empowering these people and it's happening in Africa, Indonesia, and a few developing nations. Obviously, they are unbanked because they don't have basic identification documents, no KYC. Now the standard norm every country is adopting in regulating Bitcoin is enforcing KYC/AML laws. It could very well-be argued that you can buy/sell Bitcoin without KYC. About a month ago read a post on Reddit that LBC started doing KYC/AML, but again there are alternatives like Paxful and decentralized platforms like Bisq, but the point is compared to centralized platforms that are KYC/AML compliant the non-KYC ones have less liquidity, significant price difference, chances of getting scammed is very high.

Quote
If Know Your Client / Anti Money Laundery regulations (KYC/AML) were imposed to Bitcoin, then Bitcoin losses two of its main features which is openness and no legal infrastructure costs. KYC/AML regulations dramatically raise the barriers of entry for the poorest and also hinders Bitcoin for countless of legitimate use cases that would benefit all of us.

There are billions of unbanked people in the planet, and one of the reasons for that is that they could never overcome a KYC/AML process because they don´t have the means to prove their identity or they lack from the requirements necessary to comply with KYC/AML.

If we impose KYC/AML regulations on Bitcoin, then Bitcoin won’t make any difference from Dollars, Euros or VISA and the only ones that will be using Bitcoin will be the criminals, as criminals are indeed specialists in bypassing the laws, that’s their “job” (they will use TOR VPN´s or similar). It will be indeed a self fulfilling prophecy privileging the criminals, underpinning the bad use of Bitcoin and banning the many good and useful feautures of Bitcoin from being used by the honest and the poorest.

The only ones that will be using Bitcoin will be the criminals part is pure BS, but the unbanked trying to bypass laws not for the sake of anonymity or anything illegal, but regulations leaving them with no other choice. So with centralized licensed exchanges around the corner, would this create an entry barrier for the unbanked or would it establish some big players in decentralized exchanges?

PS: Guess I made contradictory statements Grin, but it's the overall picture.

PS: Typos in the article.

https://medium.com/@manuelpolavieja/kyc-aml-or-how-to-make-bitcoin-the-privilege-of-the-criminals-b825cd822c18

https://www.reddit.com/r/Bitcoin/comments/8ct9kl/so_localbitcoins_started_doing_kycaml/
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May 20, 2018, 06:59:36 AM
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I'd say that the unbanked are not only unbanked due to the fact that they have no identity documents. Some people may simply live too far away from a banking facility, others may live in a country where the currency is so depreciative that prices change several times a month, and there is simply no point in getting an account at a bank if the currency stored there isn't even going to hold its value.

Bitcoin serves these people really well, in my opinion, if it can be presented in a consumer-friendly form.

I personally believe that currently what bitcoin is most useful for is still for people in countries with a turbulent economy, like Venezuela, where they can essentially have "savings accounts" with bitcoin. Of course, excessive KYC on exchanges will be extremely disincentivizing and inconvenient for people to get their hands into BTC, but p2p trading is going to take over in failing economies with no major exchanges anyways. And there is always going to be traders, even if it's not on LBC.

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May 21, 2018, 02:58:46 PM
 #3

This is going to a bitter pill to swallow for everyone as KYC/ AML requirements keep increasing. The problem with unbanked people isn't just documentation but also low literacy levels and lack of basic infrastructure. You can't expect that kind of unbanked person to be able to use bitcoin safely anyways.

I find all this talk about "banking the unbanked" pretty much fluff. The people who will get onto bitcoin will have the necessary resources to own a cellphone and have access to a good enough network. Anybody who fulfills that requirement will surely have a basic identity document. If we talk about those who don't have them, or have to jump through too many hassles for it, for example an illegal immigrant trying to make some money. In these cases, I bet they'll already be following some underground means to manage their money. They can make the jump to crypto through such "underground" providers.

KYC/ AML requirements are necessary for governments to be able to take a reasonable view. Once you have acquired bitcoin, there are plenty of ways to maintain your privacy and anonymity. If you choose to use it for trading and earn an extra income, there shouldn't be a problem in paying the taxes.
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May 21, 2018, 03:04:53 PM
 #4

One of my problems recently is this. I am one of those who have nothing on the bank. It is just my payroll that comes in it and I withdraw that money quickly when the salary was given.
Now, there is a KYC in one of my escape online wallets. They want this and that and they are limiting the amount that I could withdraw.
Although I have the identifications needed and have already sent some after like an amount of money of withdrawal they are doing it again.
What is the difference now with banks?  Cry
Somehow it is scary and might urge some people to withdraw their money that will cost the value of bitcoin and other coins.

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May 22, 2018, 09:39:01 PM
 #5

The topic of the unbanked reminds me of a thread made in this section back in april 2018:

People argue about bitcoin.  Is it a currency, or an investment? Is it a speculative bubble, or is it here for the long run? What about Blockchain technology?  One thing is certain. Bitcoin is plugging the holes of the archaic financial system and providing real solutions for current problems.  One problem it solves is the banking of the unbanked.

Global leaders everywhere call for the pursuit of sustainable growth.  Financial inclusion is critical to any effort raise people out of poverty.  The poorest countries in world are severely underbanked.  However, we are now seeing 90 percent digital mobile penetration in these unbanked areas. While these spots may not be able to access traditional banks, they can access the blockchain from their phones. We see the decentralized dawning of a new era in financial systems.

You don’t have to look halfway around the world to see the effects of under-inclusion. In the United States, the FDIC recently found that 27 percent of US households were unbanked or underbanked. After the 2008 recession, banks closed the least profitable branches across the country. This left gaps for rural Americans without access.  Online banking was supposed to fill some of these gaps, but the high number of unbanked families persists.  Internet connectivity in rural homes in difficult.

The unbanked both in the U.S. and globally face high fees that destroy their ability to save money.  Have you ever tried to cash a check at these so called “Check Cashing” businesses?  It is legalized highway robbery. Additionally, these poor folks often face insurmountable obstacles to obtain the credit that is needed to buy a home or start a business.

Bitcoin and other cryptocurrencies are the solution! Because of distributed ledger technology known as the blockchain, digital currencies require no trust between parties.  They cannot be counterfeited.  The entire transaction history is completely transparent and mathematically proven.  Bitcoin and other cryptocurrencies are a way for people and businesses to bypass the traditional banks and engage in direct commerce.  Any unbanked person with a computer or a smartphone now has the opportunity for greater financial inclusion!

Compared with the old archaic financial system, there are numerous advantages in cost and security. There are no fees to store wealth via bitcoin.  It takes very little time for funds to clear. The already low transfer fees for crypto continue to drop as the network protocols become more efficient, and the flat fees are the same regardless of the amount transacted or location of the recipient.  Instead of waiting days for transferred money or paying high fees to cash checks, blockchain allow for the seamless flow of payments.  This creates tremendous opportunities for people to access micro-lending.

The internet is a $4.2 trillion global economy.  If it were a country, it would be one of the five largest economies in the world.  Doesn’t it make sense that the digital economy would have its own currency?  Shouldn’t we remove physical barriers of exchange?  Companies like Walmart, Amazon, Kodak and Starbucks are set to explore blockchain payment systems.  It seems that no company in the world want to be left out of this growing opportunity.

America is at the crossroads, and hopefully the world stands with us. Some feel that we must regulate cryptocurrency, this could stifle innovation and slow growth. Many regulatory bureaucracies are products of the existing archaic system and fear they will be replaced by the new blockchain technology.  The U.S. guides the financial markets.  Regulatory harmony is extremely important.
Archaic banking systems have served us for decades, but they fail to include many people. We must stand for innovation and freedom!  Bitcoin must work without excessive government interference!  We are obligated to help the unbanked and the poor around the world.  They should be allowed the inclusion Bitcoin and crypto provide.  

There could be a fine line separating centralized regulation from kyc the author of that medium piece is missing. Crypto currency loan platforms of the past utilized kyc checks in the form of picture ID requirements without imposing the significant and overbearing restrictions some claim kyc represents. In theory, kyc is limited to $10,000 (usd) sums of money and mainly affects the bigger players who deal in larger sums of crypto currency.

The idea that only criminals can thrive in regulated financial or economic markets would seem to imply that regulated banks and investment markets are places where only criminals can thrive. That appears to be the argument of medium OP.

There could be a case made for that. I won't go into details as the last time I said something negative about fool.com they actaully IP banned me for 24-48 hours. And as a result, I'm going to try not to criticize anyone even if its an infringement on freedom of speech and typical consumer feedback. Let's just say there could be evidence for it.

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May 23, 2018, 09:47:51 AM
 #6

It's important to note the fact that bitcoin's network itself can't actually be forced to implement KYC. The third party providers here are the ones that are being forced to implement KYC for its customers, not the bitcoin network itself.

You can still use bitcoin without any form of ID, and that's really the point. There will always be individual traders around locally, or online, if buying from a regulated exchange means draconian KYC measures for you.

Anyways, the level of KYC being conducted is really a big concern right now. But this comes with adoption, governments will inevitably force strict verification onto exchanges. To me, it doesn't bring anything positive, but can't really be avoided.

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May 23, 2018, 11:35:01 AM
 #7

Read an article on Medium, don't think it's going to get much claps, but the subject is a bit thought-provoking. About two billion in the world are unbanked and the major use case of Bitcoin is empowering these people and it's happening in Africa, Indonesia, and a few developing nations. Obviously, they are unbanked because they don't have basic identification documents, no KYC. Now the standard norm every country is adopting in regulating Bitcoin is enforcing KYC/AML laws. It could very well-be argued that you can buy/sell Bitcoin without KYC. About a month ago read a post on Reddit that LBC started doing KYC/AML, but again there are alternatives like Paxful and decentralized platforms like Bisq, but the point is compared to centralized platforms that are KYC/AML compliant the non-KYC ones have less liquidity, significant price difference, chances of getting scammed is very high.

Quote
If Know Your Client / Anti Money Laundery regulations (KYC/AML) were imposed to Bitcoin, then Bitcoin losses two of its main features which is openness and no legal infrastructure costs. KYC/AML regulations dramatically raise the barriers of entry for the poorest and also hinders Bitcoin for countless of legitimate use cases that would benefit all of us.

There are billions of unbanked people in the planet, and one of the reasons for that is that they could never overcome a KYC/AML process because they don´t have the means to prove their identity or they lack from the requirements necessary to comply with KYC/AML.

If we impose KYC/AML regulations on Bitcoin, then Bitcoin won’t make any difference from Dollars, Euros or VISA and the only ones that will be using Bitcoin will be the criminals, as criminals are indeed specialists in bypassing the laws, that’s their “job” (they will use TOR VPN´s or similar). It will be indeed a self fulfilling prophecy privileging the criminals, underpinning the bad use of Bitcoin and banning the many good and useful feautures of Bitcoin from being used by the honest and the poorest.

The only ones that will be using Bitcoin will be the criminals part is pure BS, but the unbanked trying to bypass laws not for the sake of anonymity or anything illegal, but regulations leaving them with no other choice. So with centralized licensed exchanges around the corner, would this create an entry barrier for the unbanked or would it establish some big players in decentralized exchanges?

PS: Guess I made contradictory statements Grin, but it's the overall picture.

PS: Typos in the article.

https://medium.com/@manuelpolavieja/kyc-aml-or-how-to-make-bitcoin-the-privilege-of-the-criminals-b825cd822c18

https://www.reddit.com/r/Bitcoin/comments/8ct9kl/so_localbitcoins_started_doing_kycaml/

I do believe that this will lead to chaos if they don't try to accept it by everybody. We should try to adapt it and try to do the best we can to promote it in a nice way.


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May 24, 2018, 08:34:25 AM
 #8

Naturally, the causes of people being unbanked remains a concern to government for economic and national growth which is a certainty in the developing nations and Africa. However, KYC in crypto currency infringes on one of its core feature - regulation, but could be a blessing in disguise as it may aid legal authorizations/adaptation of its use by some jurisdictions. If KYC would cure legalization of use which had limited the use of crypto currency then the degree of personal information required should be the only concern - minimal basic information but for the activities of criminals.
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May 24, 2018, 11:42:51 AM
 #9

The unbanked in any part of the world be it developing or underdeveloped country should not use means of identification as an excuse for banking. The government of each have provided a place where identification document are given to their citizen. May be the unbanked have a cat in their basket.

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August 08, 2018, 08:47:02 PM
 #10


I do believe that this will lead to chaos if they don't try to accept it by everybody. We should try to adapt it and try to do the best we can to promote it in a nice way.

Basically we can not do anything, we need to have the strength to get out. Like @ShadowBits's perspective, we should get used to that. What we should do now is to do our part. Only then have the opportunity to improve the situation.
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