Crypto World Rocked After Long-Time Advocate Backpedals

crypto world rocked after long time advocate backpedals
Crypto World Rocked After Long-Time Advocate Backpedals

It’s a dark day for crypto when one of the best known exchanges offering peer-to-peer trading, more in line with the original vision for Bitcoin than centralized exchanges, will start asking users for personal information.

Erik Voorhees, chief executive officer of cryptocurrency exchange ShapeShift, said in a blog post on Tuesday the platform is launching a membership program, which “requires basic personal information to be collected” and will “become mandatory soon.” It seems like an about-face for the platform which Voorhees said was known as “the exchange without accounts.”

ShapeShift is making the move after users requested account-related features such as email notifications, as it’s exploring the ability to tokenize loyalty programs, and company officials recognize the need to be “prudent and thoughtful in our approach as we navigate the regulatory environment.” While there was no mention of specific regulatory requirements or enforcement action, cryptocurrency watchers have zeroed in on that last item and are speculating Swiss-based ShapeShift has caved to regulators.

“Erik has been in the space from the start advocating the decentralization of cryptocurrencies, and now he’s being criticized for selling out, but here’s the thing: He knows he’s not above the law,” said Katherine Wu, who heads business development at crypto research firm Messari Inc. “Regulators aren’t trying to shut down innovation, but they need to watch out for retail investors. Until we have a better regulatory framework for the crypto industry, there’s going to be a disconnect between this fast-moving industry and the slower law-making process where everyone will be in a tough spot.”

Scrutiny of cryptocurrency exchanges has intensified in the past year as startups raise billions of dollars in digital tokens trading in a gray regulatory area as U.S. officials have said they’re most likely securities, while claims of market manipulation and outright fraud abound. As exchanges and other firms make an effort to comply, some enthusiasts will see that as crypto losing part of its ethos, while to some participants in more traditional markets it may be what’s needed for them to take the space more seriously.

Voorhees said ShapeShift’s membership program will be tiered in five levels. The most basic level is free and open to everyone, and levels 2-5 will give users benefits in exchange for “possession of specific amounts of FOX tokens,” an Ethereum-based digital coin.

Earlier this year the U.S. Securities and Exchange Commission reiterated that many online trading platforms for digital assets should register with the agency as exchanges, while former New York Attorney General Eric Schneiderman asked 13 cryptocurrency exchanges for detailed information about their operations as part of a “fact-finding inquiry.”

Exchanges based in the U.S. have largely stuck with bigger coins like Bitcoin and Ether to avoid problems with regulators. ShapeShift offers dozens of coins on its platform.

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Author: HEDGE

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