Endpoint

6/5/2018
12:30 PM
Dark Reading
Dark Reading
Products and Releases
50%
50%

68% of EU, US Crypto Exchanges and Wallets Fail on Proper Customer Identity Checks

London and Amsterdam, June 5th, 2018 — Analyst house P.A.ID Strategiesannounces the results of research into the onboarding practices of cryptocurrency wallets and exchanges. The research, commissioned by Mitek, a global leader in digital identity verification solutions, looked into whether prominent cryptocurrency exchanges and wallets across Europe and the US are using Know Your Customer (KYC) checks when on boarding customers.

The research, “The Cryptocurrency Identity Crisis” shows that of 25 prominent custodian wallets and crypto exchanges examined, 68% are allowing users to trade crypto and fiat currency with no formal identification and no Know Your Customer (KYC) checks. The EU’s fifth anti money laundering directive, AMLD5, will bring these platforms into line with other financial products such as bank accounts, demanding that checks are carried out on new customers to affirm their identity.

The recent surge in ICOs and the volatile price of bitcoin has made the crypto markets an attractive place for both legal and not-so-legal trading activity. However, for the 68% of exchanges and wallets that do not meet upcoming regulation, there are no identity verification checks against official identity documents, against Politically Exposed Persons lists or sanctions screening, and no audit trail that would help to trace criminal activity. As well as failing to meet upcoming compliance demands, this could lead to irreparable harm to the reputation of these platforms if they are used to launder money.

The research ranks wallets and exchanges according to how compliant the onboarding process is, with AMLD5 due to come into force next year, plus the speed and simplicity with which a customer can sign up and get started. The below table ranks exchanges and wallets according to their identity verification process.

 

Company

Wallet / Exchange

Requires unverified personal information

Requires official ID documents to begin trading

ID Verification Score (/10)

Coinbase

E

P

P

9

Gemini

E

P

P

9

Poloniex

E

 

P

9

itBit

E

P

P

9

Luno

W

P

P

8

Bonpay

W

P

P

8

Mercatox

W

P

 

7

Kraken

E

P

P

7

Bitstamp

E

P

P

7

CoinCorner

W

P

 

7

QuadrigaCX

E

P

 

6

Cex.IO

E

P

 

6

Blockchain Wallet

W

 

 

6

Wirex

W

 

 

6

Lykke Wallet

W

P

 

6

Coinexchange

E

 

 

5

Exmo

E

 

 

5

Coinjar

W

 

 

5

Liqui

E

 

 

4

Local Bitcoins

E

 

 

4

YoBit.net

E

 

 

4

BitPanda

W

 

 

4

Bitwala

W

 

 

3

SpectroCoin

W

 

 

2

Indacoin

E

P

 

2

 

In order to sign up to exchanges and wallets that do not perform KYC, customers only need a verified email address and mobile number. Both of these are easily obtainable without ID—any webmail service such as Gmail or Outlook.com can provide an email address, while in many countries a pay-as-you-go mobile phone would provide the number. Armed with these, users of the services that fail to meet upcoming AMLD5 regulation can buy and sell cryptocurrencies and exchange them for fiat currencies.

“Cryptocurrency wallets and exchanges want to enjoy the same trust as the wider traditional financial services, but for this to happen they need to rise above the sometimes-dubious reputation of cryptocurrency’s past and be seen as ‘model citizens’ of the economy,” said John Devlin, Principal Analyst, P.A.ID Strategies. “Meeting regulatory demands ahead of AMLD5 coming into force could go a long way to changing this sector’s reputation as being something of a ‘wild west’.”

“Wallets and exchanges want to change perceptions of lawlessness and it’s a relatively straightforward fix. Identity verification processes can be—if implemented correctly—simple for the customer and no barrier to signing up,” said Kalle Marsal, COO, Mitek. “By incorporating systems that are just as future-looking as cryptocurrency itself, exchanges and wallets can be both competitive and compliant with regulatory demands."

Companies surveyed included Kraken, Poloniex, Coinbase, Coinjar, Luno and Bitwala. The report can be downloaded here:https://www.miteksystems.co.uk/resources/cryptocurrency-paid-strategies

 

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
12 Free, Ready-to-Use Security Tools
Steve Zurier, Freelance Writer,  10/12/2018
Most IT Security Pros Want to Change Jobs
Dark Reading Staff 10/12/2018
Most Malware Arrives Via Email
Dark Reading Staff 10/11/2018
Register for Dark Reading Newsletters
White Papers
Video
Cartoon Contest
Current Issue
Flash Poll
The Risk Management Struggle
The Risk Management Struggle
The majority of organizations are struggling to implement a risk-based approach to security even though risk reduction has become the primary metric for measuring the effectiveness of enterprise security strategies. Read the report and get more details today!
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
CVE-2018-1744
PUBLISHED: 2018-10-15
IBM Security Key Lifecycle Manager 2.5, 2.6, 2.7, and 3.0 could allow a remote attacker to traverse directories on the system. An attacker could send a specially-crafted URL request containing "dot dot" sequences (/../) to view arbitrary files on the system. IBM X-Force ID: 148423.
CVE-2018-1747
PUBLISHED: 2018-10-15
IBM Security Key Lifecycle Manager 2.5, 2.6, 2.7, and 3.0 is vulnerable to a XML External Entity Injection (XXE) attack when processing XML data. A remote attacker could exploit this vulnerability to expose sensitive information or consume memory resources. IBM X-Force ID: 148428.
CVE-2018-18324
PUBLISHED: 2018-10-15
CentOS-WebPanel.com (aka CWP) CentOS Web Panel 0.9.8.480 has XSS via the admin/fileManager2.php fm_current_dir parameter, or the admin/index.php module, service_start, service_fullstatus, service_restart, service_stop, or file (within the file_editor) parameter.
CVE-2018-18322
PUBLISHED: 2018-10-15
CentOS-WebPanel.com (aka CWP) CentOS Web Panel 0.9.8.480 has Command Injection via shell metacharacters in the admin/index.php service_start, service_restart, service_fullstatus, or service_stop parameter.
CVE-2018-18323
PUBLISHED: 2018-10-15
CentOS-WebPanel.com (aka CWP) CentOS Web Panel 0.9.8.480 has Local File Inclusion via directory traversal with an admin/index.php?module=file_editor&file=/../ URI.