Kraken received 50% more inquiries from regulators in 2019

Cryptocurrency exchange Kraken in the latest tweet shared an infographic revealing the number of inquiries exchange receives from the global law and enforcement. In 2019, the exchange received a total of 710 inquiries, a 50% increase compared to 2018.

Most of the inquiries (nearly 60%) came from U.S. authorities. Exchange notes that though the rate of inquiries from U.S. geography is nearly the same y-o-y, however, other geographies are catching up and doing a regular check on exchanges. This growth in inquiries has increased exchange operation costs.

Why more inquiries:

Last year the UN released a report on Drugs and Crime in which it mentions that 2% to 5% of the global GDP is laundered each year, much of it in cash. But over the last few years, cryptocurrencies have become a popular option too for money-laundering.

Since the report, many governments have started to investigate crypto exchanges. In some jurisdictions, exchanges are to maintain trading data of each user and provide it to the authorities. The regulatory requirements will continue to shape the cryptocurrency ecosystem. Companies need to put stringent compliance solutions in place or risk shutting down.

Recently, UK based start-up Bottle Pay shut down their business citing concerns over new European Union regulations which requires exchanges to maintain stringent KYC rules which could affect the users’ experience.

The increased pressure from regulations has made the current exchanges business model unviable. The cost of updating infrastructure may most-likely be passed-on to users by increasing buy/sell trade execution rates.