The Digital Currency Dilemma: Anonymity vs. Privacy (Op-Ed)

If you want to be viable player on financial markets then the rules of Know Your Customer (KYC) and Anti Money Laundering (AML) measures need to be central to company policy. Fundamentally Bitstamp’s management misjudged the issue, in the development of their client base.

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The Digital Currency Dilemma: Anonymity vs. Privacy (Op-Ed)

First Global Credit’s CEO Gavin Smith comments on digital currency exchange Bitstamp’s policy change and the issue of anonymity in the digital currency markets.

This week Bitcoin Exchange, Bitstamp, fulfilled a promised policy change of handing over to the authorities all details of all the unverified accounts on their system. Further those unverified accounts would be subject to seizure of assets. The company had pre-warned its customers in September 2013 and had gone through a 13 month program of informing them of the pending change. However, despite this action the digital currency forums are today loaded with complaints about the company seizing their bitcoins. 

No doubt, companies like Bitstamp initially sanction a lax policy when it comes to verifying their customer’s identity (Know Your Customer) in an effort to increase the size of their client base in a market that is said to value anonymity. Then, as the business gains stature, they come to realize that it is necessary to adopt a more measured attitude and to be better aligned with universally accepted legislation within the world’s financial infrastructure.

If you want to be viable player on financial markets then the rules of Know Your Customer (KYC) and Anti Money Laundering (AML) measures need to be central to company policy. Fundamentally Bitstamp’s management misjudged the issue, in the development of their client base.

When creating First Global Credit, we believed that like all financial institutions we needed to adopt KYC standards for several reasons:

First and foremost, if you do not have knowledge of who is using your systems, you are creating an invitation to thieves who thrive in an environment of anonymity. If users remain anonymous it is impossible to track them if they hack systems and steal assets. By simply demanding that people verify their identity and location, those looking for easy picking are likely to look elsewhere to carry out their thefts.

The second reason, and this speaks more directly to how we chose to structure our business, is that no one operates their business in a vacuum. We operate ours in the real world, where, if you choose to ignore AML and KYC, you are creating the perfect environment for a government to enter and seize your client’s assets.

First Global Credit

Privacy is the issue not Anonymity

Privacy is the issue not anonymity - this is the point that people are missing. Reasonable people are not concerned with anonymity. What they really are concerned with is privacy and having their financial records open to examination by any government body that chooses to make a blanket request.

“We have chosen to domicile our businesses in countries that share our values of respecting our client’s privacy.”

- Gavin Smith

There is a simple and realistic way to deal with this issue that certainly takes more work, but does not counter agreed conventions. We have chosen to domicile our businesses in countries that share our values of respecting our client’s privacy. This attitude is shared by many significant financial companies who have taken the view that they will not and cannot operate an office in any country that demands the right to make a blanket request to look at customer information.

If a warrant is issued due to suspected criminal activity there is absolutely no question that we would pass that along to our solicitor to be taken up in a court of law. Furthermore, if there is evidence of criminal activity, we will certainly provide full details of that particular customer to the authorities.

There are still places in the world that have the same view that we hold. That people are innocent until proven guilty and that governments are run for the benefits of people, not to control or dominate them. So the question we should be asking ourselves is:

What countries can we operate in where they share our values of respected privacy?

First Global Credit client accounts are currently held in Charlestown, Nevis and Belize. The server infrastructure is located in Switzerland, with technical service and support managed in the UK. No customer details are held in the UK or on UK servers and employees of the UK Company have no access to detailed customer records. This protects our customers from a blanket request for information by the UK or US authorities.

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