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LocalBitcoins Credits Reduced Dark Web Transactions to New AML and KYC Requirements

LocalBitcoins

LocalBitcoins decision to pivot into a more regulatory-compliant exchange was one of the company’s most significant moments. However, it’s also led to some significant benefits. New reports confirmed that the exchange had seen a significant decline in transactions across the Dark Web. LocalBitcoins’ focus on regulations has substantially deterred criminals from its service.

Reduced Illicit Transactions is a Win for LocalBitcoins

LocalBitcoins is one of the largest peer-to-peer crypto exchanges in the world. However, most of these exchanges have also received criticism from people who claim that they don’t have robust anti-money laundering (AML) and know-your-customer (KYC) regulations.

Late last year, the company got clearance from the Finnish Financial Services Authority (FIN-FSA, the financial regulator of its home country. Given that Finland has a strictly-regulated crypto space, the exchange had to implement strong AML and KYC policies in recent weeks.

The move essentially marked a rebellion towards the norms of pep exchanges. However, LocalBitcoins is reveling in the fact that it also helped reduce illicit transactions. Per reports, the top service saw a 70 percent decline in transactions from Dark Web markets between September 2019 and May 2020.

Speaking with industry news source Cointelegraph, Jukka Bloomberg, LocalBitcoin’s Chief Marketing Officer, alluded the drop to the new security features. It’s worth noting that the decline also coincided with the exchange seeing an overall decrease in the volume of Bitcoin traded over its platform last year.

Data from Coin Dance points out that weekly Bitcoin trading volumes on the service dropped from almost 14,000 BTC in January 2019 to about 4,000 BTC in January 2020. The drop is even worse when considering metrics between September 2019 and May 2020. As Coin Dance showed, the exchange experienced a 20 percent decline in Bitcoin trading volumes, moving from an average of 5,000 BTC to 4,000 BTC. Despite the drop, however, LocalBitcoins sees the reduction in illegal transactions as a positive. 

Significant Losses in Other Areas

Along with the progress in tackling illegal transactions, LocalBitcoins was also able to point out success in several other aspects. Blomberg told Cointelegraph that the exchange had witnessed a significant uptick in performance over the past three months, leading them to believe that demand for digital assets had improved. Bloomberg confirmed that LocalBitcoins had seen a 50 percent increase in new customer registrations since the start of the year – moving from about 4,000 new daily signups to 6,000.

As pointed out earlier, LocalBitcoins’ decision to become more regulatory-compliant hasn’t come without consequences. Many customers who flock to p2p platforms do so because of the potential for making anonymous transactions. So, it’s only expected that the exchange will lose customers.

Several of the exchange’s rivals have also pounced at the opportunity. When it’s clearance in Finland became public, LocalCryptos, one of the exchange’s top competitors, immediately announced that it had added Bitcoin support. LocalBitcoins also lost its status as the largest p2p trading platform in the crypto space. Research firm Arcane Research noted the milestone, pointing to the new AML and KYC requirements as a significant reason why LocalBitcoins had bled customers.

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