Hidden Road Severs Ties with ByBit Amid AML and KYC Discrepancies; Crypto Mixer Services Under Legal Scrutiny
Summary:
Hidden Road, a Citadel-backed brokerage, has ceased offering access to the ByBit exchange due to disagreements over KYC and AML verification protocols. In response, ByBit committed to auditing its operations. The article also discusses contentious issues around AML regulations in the crypto landscape and cites research reflecting a negligible impact of such regulations on illicit finances. It also highlights the legal troubles of crypto mixer services, for example, the U.S. legal authorities' crackdown on Tornado Cash and Samurai Wallet on accusations of money laundering.
Brokers associated with Hidden Road, supported by Citadel, were recently denied access to the ByBit exchange. Clients of Hidden Road were apprised of these developments well in advance. Discrepancies between Hidden Road and ByBit over verification procedures such as Know Your Customer (KYC) and Anti-Money Laundering (AML) protocol were reported as the primary triggers for this service disruption, as per Bloomberg. ByBit responded by pledging to audit its brokerage operations to guarantee effective enforcement of regulatory policies.
Related: Bybit's CEO dispels bankruptcy rumours, presenting proof-of-reserves.
In decentralized finance, KYC verification and AML regulations have stirred significant controversy, causing a rift within the cryptocurrency community.
A recent study in Policy Design and Practice, an academic journal, revealed that AML regulations hardly impact illicit financial dealings. The article stated that measures against money laundering influence less than 0.1% of criminal finances, with the cost of compliance far outweighing the amount of criminal funds recovered. It also points out that banks, ordinary citizens and taxpayers face more penalties than criminal entities.
The same research disclosed that the global earnings from criminal activities in 2018 represented only 3.6% of all GDP, a statistic that has remained largely constant over the years analysed.
A graphic illustration of global earnings for illegal finance. Source: Journal of Policy Design and Practice.
Several ventures like Tornado Cash, Samurai Wallet and the privacy coin Monero have sought to sidestep these regulations by offering users services such as crypto mixers and tumblers.
In the month of April, Federal authorities in the U.S apprehended Keonne Rodriguez and William Lonergan Hill, the creators of Samurai Wallet, accusing them of infringing money laundering laws.
The U.S Department of Justice (DOJ) charged both developers with conspiracy to commit money laundering and conspiracy to run an unlicensed money transmission service.
Prior to the DOJ's actions against Samurai Wallet, Tornado Cash had been accused by the U.S Treasury of abetting money laundering, leading to the arrest and charging of the founders of this widely-utilised mixing service.
Tornado Cash's developers were accused by U.S officials and European allies of laundering $7 billion in digital assets in 2022. Consequently, the developers of Tornado Cash, namely Alexey Pertsev, Roman Semenov, and Roman Storm were charged and arrested for their involvement with the mixer protocol.
Dutch authorities arrested Pertsev and following trial, he was sentenced to a 64-month prison term for his part in the project.
Published At
5/30/2024 7:30:40 PM
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