IDEX, the world’s most popular decentralized exchange, is to transition to a full verification model. The move comes days after the platform began excluding residents of New York State as part of its compliance efforts. Its latest measure, described by IDEX as “pragmatic decentralization” has drawn ire from a segment of the cryptocurrency community.
IDEX Goes Full KYC
A cryptocurrency exchange introducing know your customer (KYC) requirements is not generally headline news. When the platform in question is a decentralized exchange (DEX), however, typically one of the last outposts of privacy, it’s a major talking point. IDEX’s decision will be monitored closely by the cryptocurrency community to see whether it is an isolated incident or the shape of things to come. IDEX’s dominant position within the DEX market, capturing around 7x the trading volume of its nearest competitor, means it exerts significant influence.
Explaining its transition to a full KYC model, IDEX wrote: “Decentralization exists on a spectrum, and unless your system or application lacks any centralized parts it can be subject to regulation. Aurora is working to create a fully-decentralized financial system, but the path to getting there requires significantly more control and centralization than the end state. In addition to IP blocking, IDEX will be implementing KYC/AML policies in order to comply with sanctions and money laundering laws.”
Same Security, Less Privacy
Traders tend to use decentralized exchanges for three reasons: custody (they retain control of their funds at all times, mitigating the likelihood of theft), privacy (no KYC means not having to disclose your activities to the authorities, or risk having your identity stolen) and finally to gain access to desirable tokens before they make it into a major exchange.