Bitcoin ATM maker Robocoin has announced that all of its machine operators must now impose Know Your Customer (KYC) and Anti Money Laundering (AML) controls on their users in order to satisfy FinCEN compliance rules. Robocoin stated: ‘Under our lawyer’s advice we cannot process anonymous financial transactions’.
Following the announcement Robocoin pulled the plug on all non-compliant ATM machines and told the operators of those machines that if they wanted to return to business they must upgrade their software in order to become KYC and AML compliant.
Dissent against Robocoin
Many Robocoin operators and users are upset about the move, with some even planning to boycott the system or replace it with competitor Lamassu. Robocoin is already fairly unpopular within the Bitcoin community and this latest development will not gain them any new fans.
The company has previously been criticized for levying excessive fees, offering only one year warranties and hiding costs associated with the use of their platform. Andrew Wilkinson of MetaLab has published a lengthy document entitled: The Great Robocoin Rip-off in which he details his company’s loss of $25,000 which he attributes to late shipping of a Robocoin machine and horrific customer service.
These kinds of stories have been building dissent for a while and the loss of anonymity may be the last straw for many who originally supported Robocoin.
Why the need for pseudonymity?
While Bitcoin is not truly anonymous, the ability to use the platform without submitting excessive personal information is important to many, not least because opening the average bank account often requires less personal information than many so-called KYC and AML programs. Aside from innocent people not wanting governments or badly run Bitcoin companies building databases of their sensitive information, the need to remain as anonymous as possible arises from the ability to view transactions in the public blockchain.
If the blockchain is publicly viewable then it gives anyone who can read the explorer an opportunity to identify wallets which hold large amounts of currency. If such persons also have access to a screenshot of a wallet holder’s passport and home address this can put them at great personal risk. Bitcoin companies are not established entities in the way high street banks are, so the chances of information leaks and rogue employees taking advantage are high.
When pseudonymity is removed from the equation, the power of blockchain technology also gives governments and law enforcement agencies a much greater level of control over an individual’s finances than traditional banking ever did. This fact is antithetical to the spirit of Bitcoin because when the protocol is locked into centralized identity tacking systems it becomes quite dangerous rather than beneficial.
Robocoin caves in to pressure
It is clear why Robocoin have made this move; because they don’t fancy falling foul of FinCEN. But Bitcoin businesses should have formed a union and together refused to cooperate with FinCEN and other regulatory bodies until some intermediate method could be worked out which would preserve the sanctity of users. Instead Robocoin and countless others have surrendered without a fight.
Robocoin CEO Jordan Kelley made the statement: ‘We love anonymity, but we also love the idea of getting millions of people Bitcoin, and we can’t do that if machines are getting seized’. That may be so, but the idea of getting millions of people into Bitcoin is not a good one if Bitcoin is a completely co-opted system that puts those millions of people at risk of identity theft, robbery or oppression.