Crypto Exchange Digitex Removes KYC to Protect User Data
Adam Todd, CEO at Digitex Futures Exchange, reveals that the exchange will completely take down all KYC as of April 2020 in response to earlier data leakage.
Digitex, a Seychelles-based crypto derivatives exchange, will start removing KYC identification this week in response to a major user data leak that happened last month.
Digitex will have no KYC identity requirements as of April 2020
Adam Todd, CEO at Digitex Futures Exchange, revealed the news in a public video statement on March 4, declaring that Digitex will have all KYC identification processes removed from its platform as of April 2020.
Todd clarified that the exchange will begin getting rid of KYC this week, saying:
“As of the end of this week, we're gonna remove all KYC identity verification from every part of our exchange. To buy Digitex tokens from our treasury, you will not need to do KYC. And when we go mainnet in April, there will be no KYC identity verification requirements of any kind to use our exchange.”
Digitex is currently running in beta version, only allowing its users to buy its native token DGTX. After the mainnet launches on April 27, Digitex will allow users to freely trade between DGTX and Ether (ETH) as well as other cryptocurrencies. Todd told Cointelegraph that the exchange will not offer support for any fiat currencies at any time.
According to Todd, removing KYC is the only way to guarantee that Digitex will not have personal documents leaked ever again.
Personal data of 8,000 Digitex users was stolen
Removing KYC on Digitex comes after a major user data breach at the exchange, in which sensitive user data was compromised.
As Cointelegraph reported on Feb. 29, the leakage was exploited by an ex-employee of Digitex, who purportedly stole scanned images of the passports and driver’s licenses more than 8,000 Digitex customers.
According to some reports, the purported “Digileaker” has denied that he is “an ex-employee or contractor or somebody else from Adam or Digitex’s past.”
In a public statement on March 2, Digitex explained that the exchange was only initially aware of the email data leak. However, there was a second breach that further compromised sensitive data, the exchange admitted.
A Digitex spokesperson told Cointelegraph that at least five people have had their government-issued IDs like passport photos and national identity cards leaked. The perpetrator claims to have 8,000 documents in his possession. Digitex has not yet been able to determine whether this is the case, but is currently investigating.
Big Brother is the only real reason for KYC, Todd argues
While Digitex previously hinted at the potential removal of KYC requirements, the firm’s CEO openly bashed the general concept of KYC in his new statement.
According to Todd, major justifications behind KYC rules like money laundering are “stupid” and “ridiculous,” saying:
“We all know the real reason for KYC. The real reason for KYC is that Big Brother wants to know what everybody’s doing all the time. He wants to know how much you’ve got and what you’re doing with it. I don’t believe they have the right to do that to everybody in the world.”
Digitex had adopted KYC measures for two major reasons — combating money laundering and allowing United States-based customers onto the platform, the Digitex CEO explained. But none of those justifications are reasonable for Digitex now, as users have suffered a major breach of personal data, Todd said.
Todd argued that users are not laundering cryptocurrencies like Ether on Digitex for funding international terrorism, calling that such allegations are “obvious bullshit.” Todd emphasized that the amount of money laundering that happens with crypto accounts is still dwarfed by illicit activities in fiat currencies:
“There’s two trillion dollars worth of fiat currency laundered every year which is 10x the entire market cap of every crypto currency combined. Any money laundering that is going on with crypto is a tiny fraction of a percent of what is going on in fiat. Therefore by the same logic any business that takes cash without fully identifying their customer is also funding terrorism.If this person had an account at another crypto exchange like Binance, it would take 5 days to withdraw around $100k without noticing. That is for one account, if a terrorist wanted to launder even more, there is nothing easier than creating a new account.”
“Forcing all of our customers throughout the world to prove they’re not American is unreasonable”
Digitex is already blocking U.S. IPs and asking users to confirm in its terms and conditions that they are not based in the U.S., Todd said.
He added that the U.S. IP block combined with terms and conditions should be enough for a reasonable practice of stopping U.S. users, while strict KYC rules are apparently far more than what is actually needed:
“I believe this is the reasonable way of stopping them. I don’t believe that the U.S. authorities have the right to tell me that I must do KYC identity verification of every single person in the world that wants to use my platform just so that we can block US people. That is unreasonable. I don’t think they have a legal President to make me do that and I’m not gonna do it.”
Todd said that, in the event of their team detecting a U.S. user in violation of those terms and conditions, the exchange would immediately revoke access to the platform and give them seven days to withdraw their funds.
The CEO said that Digitex expects their user base to grow after removing KYC, noting that KYC measures are a massive impediment for many people to join crypto exchanges as many people do not have government-issued IDs at all:
“KYC is a huge barrier for many people and we expect Digitex to attract a lot more users by removing it. We also stand by our belief in people’s right to privacy [...] By opening up our exchange to the world population we hope to create a product that can make a difference in people's lives.”