Citing customer privacy concerns brought on by strict new European Union anti-money laundering laws, three cryptocurrency companies announced plans to shut down in December.
The first was bitcoin gaming platform Chopcoin, which announced in November that it would close on Dec. 16. The company cited “regulatory concerns [that would] force KYC on our users.” KYC stands for “know your customer” banking regulations used to fight money laundering and combat the financing of terrorism (CFT).
The other two firms planning to close up shop this month, Simplecoin and Bottle Pay, also cited moral principles. They refused to go along with the European Union’s Fifth Anti-Money Laundering Directive regulations, which come into force on Jan. 10, 2020.
Among other things, it requires customers’ identification and verification to be based on documents, data or information from a reliable and independent source, according to consulting firm Deloitte UK.
The EU sees cryptocurrencies as one of the biggest risks to anti-money laundering (AML) activities, said Věra Jourová, then-European Commissioner for Justice, Consumers, and Gender Equality, on July 23.
“Europol estimates that around 1% of Europe’s wealth (GDP) is involved in suspect financial activity,” Jourová said in a release promoting proposed AML regulations. “That is the equivalent of the annual EU budget… We identified that the biggest risks are linked to anonymous transactions, like pre-paid cards, to virtual currencies and lack of transparency on beneficial ownership.”
Recently, three main US regulators banded together to warn cryptocurrency companies to comply with AML regulations.
Crime vs. privacy
Dutch cryptocurrency mining pool Simplecoin’s users have until Dec. 20 to withdraw funds, but can delete any personal information through Dec. 31, its announcement said. Both Simplecoin and Chopcoin were co-founded by Christian Grieger, who made the privacy-based decision, according to The Block.
“When the laws come into effect, we would be forced to require you, the users, to identify yourselves for anti-money laundering purposes,” said the Simplecoin announcement. “We have been searching for solutions for a while, but it has become apparent that there is no way around it. We believe in the power of cryptocurrency and its potential. Mining should to be available to anyone and we refuse to jeopardize our users’ privacy.”
On Friday, Dec. 13, Newcastle, England-based bitcoin social media payment service Bottle Pay announced it will close at the end of the year. The company warned that any funds not withdrawn by 8 a.m. EST on Dec. 31 “will be collected and donated to The Human Rights Foundation.”
The company had raised about $2 million from investors in October, according to the North East Times, a local business publication.
In its announcement, Bottle Pay said, “[t]he amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”
In order “to maintain our integrity as service providers, and to protect the interests of our team, investors, and users, we have taken the painful decision to shut Bottle Pay down completely rather than become subject to these new regulations,” it read. “[W]e feel confident we can close Bottle Pay with our heads held high, knowing that we always acted with the well-being of our users foremost in our minds.”
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