LocalBitcoins, one of the top peer-to-peer (P2P) cryptocurrency exchanges in the world, has been on a significant compliance push for the past few months. In the latest shift towards improved transparency and criminal prevention, the Finnish crypto exchange has now implemented several blockchain monitoring protocols on its service.
Combating Criminal Activity on Its Platform
According to a press release, LocalBitcoins has partnered with blockchain intelligence firm Elliptic to improve its oversight and monitoring of activities on its platform. The partnership has the objective of reducing criminal activity on the exchange, with the company hoping to gain better insights into customers’ activity.
No Going Back on AML and KYC Compliance
The move underlines what has been a practical shift in LocalBitcoins’ operation over the past few months. LocalBitcoins began a push for a more regulatory-friendly operation in June 2019, when the exchange removed its in-person cash trading feature.
In November, the exchange got clearance from the Finnish Financial Services Authority (FIN-FSA), thus effectively becoming a virtual currency provider in its home country. Finland’s crypto space is heavily regulated, and LocalBitcoins’ acceptance came at a particularly chilling cost.
Most notable amongst those costs was the exchange’s commitment to the European Union’s 5th Money Laundering Directive (5AMLD) and other international Know-Your-Customer (KYC) regulations.
All of this immediately drew backlash from crypto purists who have been fighting what they believed to be overreach on the part of regulators. LocalBitcoins’ rivals also swing to action as they thought that the company’s move would cause it to bleed customers.
LocalCryptos, formerly LocalEthereum, and one of LocalBitcoins’ biggest competitors, announced soon enough that it had added support for Bitcoin and Ether on its platform.
So far, the push for regulation has hurt the company’s trading volumes. Data from Coin Dance shows that volumes have dropped drastically since the in-person cash trading feature left, although the numbers seem to have risen considerably in 2020.
Despite the backlash, LocalBitcoins isn’t unfazed. For one, the company claims that it has seen results from its focus on Anti-Money Laundering (AML) and KYC compliance.
Last month, Jukka Blomberg, the company’s Chief Marketing Officer, told Cointelegraph that transactions to dark Web marketplaces had dropped by 70 percent since September 2019. As she explained, this drop was due to the company’s focus on AML and KYC compliance.
As for whether they believed that the drop in total volumes was alarming, Tonoyan answered in the negative. She told Cointelegraph in another interview:
“In the early days, people used LocalBitcoins because it was anonymous. But nowadays they use LocalBitcoins because they want a safe and legit service to buy Bitcoins.”
LocalBitcoins’ fight against criminal activity is raging on. With such brazen conviction, it’s clear that no amount of backlash can dissuade it.