The Binance KYC Leak Reveals the Need for Better Cryptocurrency Government Partnerships

Binance took a hit despite offering VIP membership to the affected parties, who had to replace their compromised official IDs.

Cryptocurrency users were treated to another scandal at the end of August, as leading exchange Binance revealed that a hacker had accessed the photo ID data of more than 10,000 users. The hacker was holding the data hostage for a ransom of 300 bitcoins.

The news hit hard for cryptocurrency users who are already feeling the sting of a declining market and one of the worst years for hacks on record. What’s more, the Binance exchange had already made substantial promises to its clients regarding security after the dramatic $40 million hack that occurred in May of this year.

These security breaches, while not unknown in the fiat currency world, do bring to light the dangers that are associated with cryptocurrencies. Because crypto assets are entirely digital, transfers and trades are therefore confined to the internet. This puts dramatically more pressure on portals to maintain strict security and regulatory controls.

Options for change?

A number of potential options have begun to come onto the scene that are designed to protect crypto users. These new platforms are offering ways to connect security and Know Your Customer (KYC) data with other non-cryptocurrency related methods.

The need being what it is, these new platforms are specifically designed to create additional layers of security methodology to both protect exchanges and users simultaneously.

Take, for example, the recent announcement by the ecxx exchange about MyInfo integration. The company has partnered with the Singapore government to create a simple way to keep personal data off the exchange, while still fulfilling KYC requirements.

MyInfo is a creation of the Singapore Government Technology Agency. It allows users to store their personal SingPass (ID information) data on a server that can then be used to verify information.

The connection to the ecxx exchange is helpful since data can be verified simply and quickly, but without actual access to the potentially harmful files. This offers protection on both sides—a veritable win-win for regulatory agencies and consumers alike.

Moving toward secure

The information from the Singapore government is helpful. It seems clear that there are a number of ways to bring security up to levels that have heretofore been hard to find at most exchanges.

However, the overall industry appears ready to make those changes in ways that are meaningful and lasting. While the industry at large seems to just tolerate government regulation, these moves toward partnership with government regulatory bodies show a willingness to not only partner, but to utilize services from government agencies.

This move reflects a growing maturity within cryptocurrencies. The simple reality that users expect greater levels of security has made the need for partnerships and creativity far more necessary.

No government necessary?

Of course, the counter argument is simple enough. Many argue that the government requirements for KYC are the very thing that is causing the risk to customer data. If exchanges were no longer forced to make such personal data information requests, customers would have next to no risk.

However, this argument fails to convince when seen with the dangers that already exist for illegal and black market activity. The simple fact is that the vast number of crypto users and governments alike are both heavily vested in finding ways to protect users and still maintain a level of regulation and security that will protect large populations.

While the ‘fringe’ element in cryptocurrencies may hold some sway, the need of the hour is openness to government input. Any other than this type of needed connection will not only put users at risk, but also create steeper paths toward general adoption of cryptocurrencies. And regardless of where someone stands on government, most users know that the hope for the future of crypto is adoption.

It may seem like a hard pill to swallow, but the simple truth is that government partnerships are the way forward for the industry. This may eliminate the outer edge of users, but, for most, this is a good thing anyway.