Binance recently came under fire for purportedly suspending a Binance Singapore user’s Bitcoin withdrawal for some time after flagging the transactions as “risk management”. The platform notified the user that a few cryptocurrency withdrawals were made using coin-mixing service CoinJoin, which is part of the privacy-focused wallet Wasabi. Among other inquiries, the Binance Singapore team allegedly enquired about the purpose of withdrawing funds to the wallet.
Source: Twitter | Catxolotl
Source: Twitter | Catxolotl
Bitcoin blockchain is public and hence the origin of the coins is traceable. One of the key tools leveraged by users to gain more privacy is CoinJoin which essentially is a method of obfuscating the on-chain links between UTXO’s. Exchanges aren’t big fans of these mixers.
As Binance Singapore blocked one of their user’s Bitcoin withdrawals over “risk management” concerns, the community echoed the famous adage “not your keys, not your coins”. Binance’s CEO, CZ tried to alleviate the issue and stated,
“For both KYC and AML, there are specialized service providers that do the analysis for exchanges and regulators. In the fiat world, banks ask for information on sources of funds, proofs of address, etc. In the crypto world, there are service providers who analyze on-chain transactions and assign different risk scores to different transactions. Most regulators require exchanges to use these 3rd-party providers.”
According to the latest Binance blog post by CZ, “this is not a choice” for the exchange to make and “people do not realize this and blame the exchange.” He also went on to say that users who are privacy focussed should use privacy coins and asked users to choose exchange wisely as there will be risks and laws associated with both regulated as well as “non-regulated” platforms.
