Ethereum based exchange, IDEX last week ended anonymous trading on its platform, having finalized the integration of KYC and AML protocols. Starting from last Friday, all customers would need to complete KYC and create an account before they are allowed to trade cryptocurrencies.
IDEX received plenty of criticism from privacy advocates after the plan was first outlined by the team in late 2018. And it’s not the first time a decentralized platform would be heavily criticized for requiring customer identification. The fact that Edward Snowden, the famous American whistle-blower, got such public attention at the Web3 Summit event held in Berlin, Germany last week indicates that privacy hardliners are here to stay.
However, predictions that KYC might bring IDEX to an abrupt end are yet to mature. Although the crypto exchange experienced initial setbacks, there is no sign of mass customer exit from the platform.
Over 12,000 users registered for an IDEX account two weeks before the deadline. And that number increased to 15,000 on Friday when the deadline expired. Overall, more than 95 percent of the exchange’s active customers had completed KYC and set up an account.
The conversion rate is more than what the company had expected. IDEX has the features of both centralized and decentralized exchanges. While customers have control over their funds and crypto transactions settle on the Ethereum-based blockchain, trades are carried out off-chain in order to prevent slippage.
IDEX announced a significant increase in volume during the crypto winter when centralized exchanges suffered. CEO Alex Wearn explained that the increase is a result of the movement of market makers onto the open-source platform.
Although the exchange initially outlined its identity verification plans in November 2018, KYC did not go live on IDEX until July 24th this year. In the crypto environment where developers are liable for illicit activities carried out on their platform, IDEX has embraced a policy of “pragmatic decentralization” to prevent regulators’ sanctions and to influence the legal treatment of cryptocurrencies.
IDEX is not the only exchange submitting to regulators. The CEO of another decentralized exchange that’s not based in the United States last week disclosed that they were about to integrate their own KYC protocols before they become compulsory. As expected, this move will improve relationships with regulators while giving the crypto exchange the chance to help create the regulatory agenda.
IDEX’s Wearn said that there are some things the exchange needs to abide by. He added that regulatory compliance enables the company to support its increasing customer base and the entire cryptocurrency industry. It is necessary “in order for us to exist.”
He also stressed that introducing identity verification comes with its own advantages. For one, it eliminates a stumbling block that has prevented institutional investors, like crypto funds, from using the exchange. At the moment, IDEX can expect deeper order books and more liquidity, which will eventually improve the experience of end-users.
Until the 24th of July, IDEX allowed customers to trade as much as $5,000 every day without identity verification. But starting from August 23rd, all their existing customers would have to undergo KYC verification in order to buy and sell digital assets on the platform. And additional identity verification, including passport scans and selfies, would be required for transactions exceeding $5,000 per day.
American customers will also be forbidden from trading some digital assets. The list of these assets will be out in the coming weeks.