While KYC has become the common standard for anti-money laundering and customer risk management processes for many cryptocurrency exchanges, Changelly’s recent implementation has left many users frustrated by its targeted procedure.
Started in 2013 as a startup by a team from MinerGate, an early Bitcoin mining pool, the site allows customers to easily and rapidly exchange cryptocurrencies through a trading algorithm.
This bot provides users with the best rate via integration through reputable exchanges like Binance, Bittrex, Poloniex, and HitBTC. Changelly operates its headquarters in Prague and is therefore subject to the European laws requiring them to be in compliance with anti-money laundering regulations.
Site Documentation Neglects to Mention Compliance
Changelly has garnered a reputation within the cryptocurrency community as being a hassle-free and easy-to-use exchange platform, only requiring users to create an account with email verification to use their platform.
While Changelly states the need for customers to provide supporting documents, the key supposition of ‘if’ means that only transaction suspected of being linked to violations of such AML regulations will be required to provide KYC supporting documentation.
Exactly how Changelly qualifies these transactions as being potentially fraudulent remains undefined, the issue has been documented by Reddit users across multiple cryptocurrencies including BTC, ETH, OMG, and XMR.
Changelly Places Itself in Awkward Position
The main issue with Changelly’s implementation of KYC is that in terms of UX design and information flow, the process leaves the exchange holding all the cards. Changelly has clearly stated that users’ transactions will be processed after providing supporting documents, however, should a user not want to provide said documents, returning the exact funds transacted would violate AML regulations.
As Changelly uses an API to immediately transact users funds via a host of other exchanges, refunding a users transaction would mean returning coins bought on the open market, in effect laundering possibly fraudulent coins.
Changelly’s customer service team has attempted to mitigate community blacklash by taking to Reddit in order to individually and publicly address users with concerns about their platforms requirements.
In addition to targeting large transactions and privacy coins, Changelly actively scans users send and receive addresses and compares them to blacklisted wallets that it claims is shared amongst large cryptocurrency services.
Due to lag in regulation for the cryptocurrency space and lack of a strict KYC framework in requiring KYC across all transactions, Changelly has placed its customers in a difficult position.
The company continues to work with customers on a case by case basis to resolve any issues, however, to prevent further confusion and ambiguities, minor clarification within the sites interfaces in tandem with transparent AML qualifications may be in order.