BitPay Angers Users with FATF-Inspired KYC Requirement

Published on Unknown Date by Cryptovest Staff

Spending over $1,000 worth of Bitcoin (BTC) comes with obligatory identity screening.

BitPay, one of the oldest crypto-payment services, has upped the ante on compliance, angering the crypto community. As the Financial Action Task Force (FATF) guidelines emerged at the end of June, all crypto service providers struggled even harder to become compliant.

BitPay was one of the last crypto-related services to allow for direct, anonymous payment. But now, the rules will apply to any larger purchase.

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BitPay still allows peer-to-peer payments without verification, and the new KYC procedure only affects interactions with merchants.

"The one-time verification requirement is for people making BitPay merchant or prepaid payments of $3,000+1, initiating refund requests for amounts of $1000+, or receiving BitPay payouts. Business users making purchases, etc. within these thresholds will also complete ID verification as individuals. Person-to-person payments with BitPay's BitPay and Copay apps aren't included and do not require ID verification," BitPay explained in ablog posting.

The crypto community has multiple criticisms against know-your-customer procedures, which have been applied to most exchanges and related services in the past year. However, screening has proven to be problematic both for the operator and customers.

BitPay will screen the identity of buyers for sums as low as $1,000, and larger purchases above $3,000 may require ID verification. Performing thorough KYC burdens crypto companies with extra costs. Using a third-party KYC services has proven problematic, allegedly leading to a recent leak on Binance. In the past, exchanges have also attempted in-house KYC, which led to shoddy practices such as sending unencrypted passport scans and other sensitive data.

BitPay will also require a product-wide ID and a login. The need for KYC arises as the accounts may need to move fiat, which is currently under the control of international anti-money-laundering rules and requirements.

Adding KYC to crypto-related services has worried owners of digital assets. The Bitcoin network is pseudonymous, and not totally anonymous. Keeping KYC data and real-world identities allow law enforcement or third parties to connect BTC addresses and activity with the person behind them.