KYC Will Not Protect Us, Bitcoin And Encryption Will
Our synopsis:
Very little has been written about the ill effects of the AML and CFT regulations and the consequent KYC requirements that we all have to endure to get some of the services or products we seek to procure.
This article fills the gap by enumerating the pros and cons of KYC.
In particular the following are worth repeating here:
While offensive tactics are easy to rally people behind — who doesn't want to stop human trafficking? — the long-term effectiveness and downstream consequences of these tactics are rarely discussed. Some of the consequences, such as a reduction in business efficiency, are easily laughed off by proponents of offensive tactics. Who cares if a corporation loses some profits if it means we can catch child abusers? However, these tactics come with very real costs to the most vulnerable among us, as well as society at large. Furthermore, the long-term effectiveness of offensive tactics is questionable at best.
Yes, that is right. When was the last time you read an article that discussed the long-term effectiveness and downstream consequences of KYC? The concerning part is that the most vulnerable among us are the most affected, who are always at the receiving end. If such offensive tactics as KYC affect the people in power and the capitalist most, then probably such tactics will receive scant attention and adoption.
Let's talk about the downsides of offensive tactics, using KYC regulations as an example. While the legal definition of KYC is specific to banking and finance, there are similar rules in place across various industries. In this post, I define KYC as the requirement for a person to provide identification and/or private information before they can receive a product or service, regardless of industry. KYC is required for getting bank accounts, healthcare, employment, housing and even phone/internet services. The stated purpose of KYC is essentially to ensure that a terrorist is restricted from using the banking system to finance their activities, or a human trafficker is prevented from using the local internet provider. This sounds noble enough, but is it actually effective?
The terrorist and human traffickers are not normal people. They are sophisticated in their approach and have the knowhow and technology to circumvent the KYC requirements. Given their sophistication, the effectiveness of KYC against them is questionable.
While the benefits of KYC are fuzzy, the costs are clear. First, the costs to everyday people are massive. Personally-identifying information such as social security numbers, birthdates and addresses can be used to steal identities, physically attack or financially rob completely innocent individuals and their families. Even if the data is not stolen from the primary source, it can be sold to secondary organizations without the user's permission. While some people may prefer to opt-in to such a system, the inability to opt-out of personal data collection is an asymmetry that benefits corporations and governments at the expense of everyday people.
The above illustrates the downside of using KYC processes. What makes this even more worrying is that criminals in corporate garb can obtain these sensitive information from us readily with the ostensible authority from of FATF and FinCEN. Currently no procedure is in place to authorize corporations to obtain or prevent them from obtaining KYC information from its customers. Besides there is also no procedure in place to check the abuse of KYC processes by corporations to gain financial advantage. For instance, we regularly hear of crypto exchanges using KYC processes as an excuse to block customer funds in exchange wallets or delay their withdrawals.
The referenced article also provides other examples.
To read more, go to KYC WILL NOT PROTECT US, BITCOIN AND ENCRYPTION WILL
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