TL;DR: US cryptocurrency exchange Kraken published its second annual snapshot of law enforcement compliance requests. “Team America still ahead with 61% of total requests, down from 66% last year,” the company explained. “Other geos gaining fast. Trend is obvious. Costs are increasing, even in a relatively flat market.” The ecosystem debate continues about legitimate criminal activity concerns versus a kind of perverse harassment or tax on startup businesses.
Kraken Sees 49% Increase in Global Compliance Requests
“Kraken has to deal with two formal surveillance requests per day,” ShapeShift CEO Erik Voorhees observed. “This is so sad that productive industry is being diverted like this. It makes a poorer world. The government is spending Kraken’s money to do police work.” Voorhees himself, an ecosystem veteran, has had notorious run-ins with law enforcement and regulators over the years with regard to innovative cryptocurrency arrangements and businesses, and so he is particularly sensitive to its costs seen and unseen.
“3 if you don’t count weekends!” Kraken’s CEO Jesse Powell shot back in essential agreement with Voorhees’ ultimate point. It doesn’t help matters, however, more than a quarter-billion dollars in cryptocurrency exchange hacks happened last year, giving law enforcement agencies and regulators around the world ample pretext for both preventative and reactive requests.
Interestingly, close to a third of world law enforcement requests were dubbed to be “Non-Valid,” according to the exchange. Important to remember too is how much information regulatory compliant businesses such as Kraken collect on their users: names, addresses, social security numbers, as well as banking accounts and transaction histories. This makes centralized exchanges vast repositories, potentially, of perhaps sensitive and very intimate metrics … especially for accounts running afoul of whatever government’s whim at the moment. It is the second such compliance snapshot published by the exchange, and last year’s offered evidence of similarly creeping encroachment from the exchange’s perspective.
To attorney Preston Byrne’s concerns about such burden placed on growing businesses and less-than lawyered up crypto enthusiasts, Powell responded, “Cost to service the 2019 LE requests was > $1m though, substantially beyond the work of one paralegal. One other thing to mention is that people who receive these requests should authenticate them through a second channel before producing. Several things contribute to the cost. Older business with 8+ years of data, millions of accounts, high security around accessibility of personal data, the good stuff is all encrypted and hard/slow/impossible to search/export in bulk (upside being its that way for hackers too).”
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