LocalBitcoins, the peer-to-peer cryptocurrency exchange, succumbed to pressure from the Finnish financial regulatory authorities. The Bitcoin-centric exchange will now be supervised by Finland’s Financial Supervisory Authority [FSA].
Announced via an official blog post, the Helsinki-based exchange detailed the legislative path that led the FSA to oversee the exchange’s operations. LocalBitcoins will see several additions to its customer verification process, following this development.
On 13 March, the parliament voted to approve the Virtual Currency Service Providers Act. It also voted for an amendment to the Act on Detecting and Preventing Money Laundering and Terrorist Financing [AML/CTF]. This law would include the supervision of exchanges like LocalBitcoins.
When this law comes into effect in November 2019, the legal status of cryptocurrency facilitators i.e. wallets and exchanges will be established in law. Despite many proponents touting this as yet another step towards regulatory pressure, LocalBitcoins looked at the brighter side and stated,
“Which should improve significantly Bitcoin’s standing as a viable and legit financial network.”
In light of these regulatory changes, the exchange is focusing on “improvement measures that will allow us to provide a safer and better service.” Five days after the act was approved, LocalBitcoins launched a new account registration process. This would make users provide identification information during signup.
The identification verification process faced severe criticism when employed by other exchanges. However, LocalBitcoins stated that this procedure was one “requested by many users.” A new four-layered account system would be established per trade and BTC transaction volume. Further, corporate accounts will be verified in a separate manner.
Finland’s approach to cryptocurrencies has not been favorable at both the parliamentary and the banking level. Days before the 13 March vote, it was reported that banks in Finland closed the bank accounts of Prasos Oy, a crypto-wallet service provider.
The CEO of one of these banks, Saastopankki, stated that the identification-less nature of decentralized currency flew in the face of the AML guidelines issued by the EU. CEO Tome Narhinen added that this could cause a problem in the future.
Several trader had hit back when the Finnish exchange introduced user identification requirements in 2018. This system would create ID requirements at varied trading levels, something seen as an indication of a centralized exchange, and not a decentralized one.
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