Friday, December 9, 2022

Automata Podcast: Neal Reiter of IdentityMind on Crypto Fraud Risk

Automata Podcast: Neal Reiter of IdentityMind on Crypto Fraud Risk

Why do bitcoin and crypto trading exchanges want so much ID — and is it the government’s business to know who’s investing in ICOs? The process seems arduous and intrusive, but (like always) the regulators have their reasons. Neal Reiter of digital identity provider IdentityMind explains the situation and why it’s more of a headache for cryptocurrency firms.

Also see: Automata Podcast: Brit Yonge of Stellar’s For-Profit Arm Lightyear

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Neil Reiter: ‘Coinbase Has 20x the Fraud of PayPal’

Before March 2013, you could sign up for bitcoin exchanges and trade as much as you like — without ever having to supply your real name. FinCEN nixed that by declaring exchanges money services business, requiring compliance with KYC/AML (know-your-customer/anti-money-laundering) regulations, and that’s the reason it takes so long to sign up for an exchange account today.

Fraud risk is so much higher in cryptocurrency than in other areas of finance, Reiter says. Up to 20 percent of Coinbase’s staff are engaged in compliance issues alone for this reason. Listen to the interview to find out why this is.

What happened to Ripple and BTC-e when they fell foul of these regulations? Why do even crypto-to-crypto exchanges like Poloniex and Bittrex now verify accounts? This isn’t a debate on the moral rights and wrongs of fraud and regulation, it’s the current legal reality and you won’t stay in business long if you don’t comply. Here’s the story from an insider’s perspective:

About the Automata Podcast

Jon Daniel Automata“The future is automated.” Automata is a series of brief audio introductions to the projects that will drive the automated economies of the future. Pactum Capital‘s Daniel Cawrey and Bitsonline senior editor Jon Southurst chat with leaders in blockchain, cryptocurrencies, freer markets (and the occasional regulator) to find out where all this is going.

You can find older Automata episodes on Soundcloud, and subscribe to the channel for more.

If you have any requests for future episodes, we’d love to hear them. Post your feedback in the comments below.

Images via Daniel Cawrey, Jon Southurst, Pexels

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