Restructuring of Cryptocurrency Exchange

[whereami]

Hi there, just looking for advice here and potentially partners if you feel this is a good fit for your service or business:

We are an established cryptocurrency exchange that is looking to restructure in the current FATF regulatory environment.

Simply put, our business model and roadmap somewhat resembles binance (not to be boring).

We were formed on the principals that user privacy should be protected and not collected. We do not have any mandatory KYC nor do we intend to.

We have never touched fiat, we are only crypto-to-crypto. In the future, this may change, and if it does we may offer Optional KYC to exchange with Fiat.


What's important to us:

Anonymity. - We have no intention of breaking laws but with some much regulatory uncertainty around the world we feel this is essential to operate internationally

Freedom from FATF and costly regulations. - We intend to efficiently self-regulate and meet the requirements of our future banking partners as well as respect the wishes of international jurisdictions. We cannot afford to be competitive and be bogged down in local regulatory costs/restrictions. Most crypto exchanges are killed by regulatory costs these days.

Nice to have:

A bank account with IBAN which can accept international deposits and clears wires in a timely manner.

Extra nice to have:

A merchant services relationship to accept credit cards.


Currently we are considering forming a company in Panama, under a parent company in Seychelles or Belize or St. Vincent. Seychelles, unfortunately, appears to have KYC restrictions which could potentially apply to crypto. Also, Seychelles does not have bearer shares. Our ideal setup, we believe, should have bearer shares on both sides. But we need more research here and we are unsure if we can still have the banking services we need.

Thoughts, proposals, comments greatly appreciated. Thank you.

Last edited: May 23, 2020

 

[anotherone]

I think that offshore companies are not suited for what you want to achieve. If you incorporate in Panama, Belize or whatever you will not be able to access the SEPA zone for euro transfers or American market. It is going to be useless.
Your asumption may be wrong. So, I know belize pretty well and now, there are more KYC/AML administrative tasks in Belize than in Germany.
In Europe , you can get an EMI license in Lithuania, you need 350,000 of capital then the fees are low. roughly: 1500 euros:
https://www.lb.lt/en/payments#ex-1-4I know this is not what you want to achieve but I just wanted to say that in the European Union and the UK, It is mandatory to ask new customer to take a picture of themselves, Take a picture of their ID.
That's it. Then, the authorities can check this. This is the only AML/KYC I am aware of.

 

[anotherone]

I think you are not familiar with this business @whereami
Let me tell you that collecting customer details is not a synonym to monitoring customers and reporting customers. I have several accounts at coinbase, bitpay, wirex, spectrocoin. bitpanda.
I note that they do all the same mistakes, their terms is not clear about the protection of customer details. I think it is possible to protect customer details without infinging the law.
Let me explain,
1/ Most of the cryptocurrency EMI do more than what their local authorities ask to do in terms of KYC/AML. For instance, noone asked revolut to implement an algorithm to monitor customers.

2/ In the UK, when the Fincancial commission authority takes attention that's because a whistlyblower contacted them. It was the case for the epayments crisis (frozen account since february? march?)

I think there is space for a company that would follow the law and also ensure customers that:

1. they are not going to get monitored
2. the company will not report a customer
3. The details of a customer will only be disclosed only if an official request will be made by an official enforcement authority in compliance with the local penal code.
4. The company will not transmit customer details to law enforcement agencies or private organizations that are located in a different country.

Check the terms of coinbase, bitpay... You will never find those clauses.

Today, the first to betray the customers are the companies themselves there aren't the governments. The btc companies are the first to terminate the accounts.

 

[anotherone]

In order to illustrate my thoughts, I would like to share with you a sample of the privacy policy of Coinbase.

So, I highlighted in red the pieces of information that are not related to any laws and that are abusive.
In yellow, my warnings and my comments.
By the way, they can collect all the information they want from the customers, if they do something illegal, they are going to get prosecuted.


We may collect the following types of information from you:

• Personal Identification Information: Full name, date of birth, nationality, gender, signature, utility bills, photographs, phone number, home address, and/or email.
• Formal Identification Information: Government issued identity document such as Passport, Driver's License, National Identity Card, State ID Card, Tax ID number, passport number, driver's license details, national identity card details, visa information, and/or any other information deemed necessary to comply with our legal obligations under financial or anti-money laundering laws.
• Institutional Information: Employer Identification number (or comparable number issued by a government), proof of legal formation (e.g. Articles of Incorporation), personal identification information for all material beneficial owners.
• Financial Information: Bank account information (for transaction ok, should not be kept in the database Quppy for instance prompts users everytime to enter the IBAN because they don't store any IBAN), payment card primary account number (PAN), transaction history, trading data ( i Have never heard that an EMI should keep trading data because it is internal to the company. I don't think this is a legal requirement), and/or tax identification.
• Transaction Information: Information about the transactions you make on our Services, such as the name of the recipient, your name, the amount, and/or timestamp. (should be kept 5 years in the system before being deleted, but they forget to mention it. However, it is the UK law)
• Employment Information: Office location, job title, and/or description of role.
• Correspondence: Survey responses, information provided to our support team or user research team.