We thought it was interesting that Shapeshift didn’t say why it’s instituting the requirement that everyone has to become a member. Our guess is that they are anticipating regulation that will require strict KYC policies for companies that trade in crypto.

In fact, the SEC has been telegraphing what it expects from exchanges and perhaps even giving the exchanges a chance to fall in line before they pounce with regulation. We know the SEC has been meeting with other exchanges to talk about upcoming regulation, so we suspect the same is likely true for ShapeShift. ShapeShift CEO Erik Vorhees certainly hints at that with this tweet.

It makes sense. The SEC doesn’t want to look like it’s trying to supress cryptocurrency, but it can’t, at the same time, appear to be lax on this nascent sector of finance.

There’s no getting around the fact that this move by Shapeshift is unpalatable, but the company is selling it with increasingly valuable membership perks that are likely intended to sweeten the deal. These may include higher trading limits, rewards on trading volume, better pricing, private market and trade data, and early access to new coins, products, and services.

Though clearly well thought out and reasonable, this move is especially painful because Shapeshift has been the “exchange without accounts.” Shapeshift CEO Erik Vorhees’ resistance to regulation is famous. He moved his office from New York to Chicago in protest for New York’s institution of the BitLicense, for instance.

In the announcement about the new requirement, ShapeShift said it still has the same values and believes that its customers “deserve the right to privacy in their thoughts, in their relationships, and in their communications.”

We fully expect that centralized exchanges are going to continue on this road to greater centralization and data collection. But this will only fuel the rise of decentralized exchanges that are already seeing increasing popularity and for the reasons you’d expect. People are tired and wary of anyone who wants to keep track of how they spend their money.

Today creating a ShapeShift membership is optional, but eventually, it will become mandatory, and we think it’s implied that no one will be grandfathered in.