LocalBitcoins has partnered with blockchain intelligence company Elliptic, the latest step in the peer-to-peer fight against criminal activity on its platform.
Elena Tonoyan, Chief Operating Officer of LocalBitcoins, told Cointelegraph that the partnership is an important step in addressing the complex challenge facing the platform. She explained:
“”LocalBitcoins only processes bitcoins. We don’t touch traditional currencies. Therefore, we do not have the same visibility of the traditional financial side as, for example, banks. In addition, LocalBitcoins is very diverse and operates in more than 150 countries, which brings with it its own practical challenges. “
Tonoyan said that processing and evaluating the legitimacy of documents in multiple languages from the site’s global customer base takes “a lot of effort.”
LocalBitcoins employs multinational people from more than 20 countries to support this. Beyond this diversity, a partnership with Elliptic provides access to more blockchain monitoring tools that can help prevent illegal use of LocalBitcoins services.
The best kind
LocalBitcoins has already had significantly stricter verification procedures as part of its efforts to comply with regulations such as the 5th EU Money Laundering Directive (5AMLD) and the international regulations for Know Your Customer (KYC).
This has led to a backlash when you consider the 50% decline in trading volume in the months after the measures were implemented at face value.
Elliptic co-founder and chief scientist, Tom Robinson, has argued that introducing better controls on websites like LocalBitcoins has ensured regardless of the cost of popularity, important gains in reducing criminal activity in space:
“”Like the rest of the cryptocurrency industry, peer-to-peer cryptocurrency exchanges have made great strides in adapting to the new regulatory environment by introducing stricter and more technological controls against money laundering.. Our data shows that this has resulted in a 50% reduction in the volume of crypto assets that have transitioned from dark web markets to peer-to-peer exchanges. “
A compromise between compliance and user protection?
Sebastian Sonntag, CEO of LocalBitcoins, has definitely left the previous operating model of the website behind. this week to “continue to invest heavily in AML and KYC to maintain a secure and reliable platform”.
Data that Jukka Blomberg, chief marketing officer of LocalBitcoins, has shared with Cointelegraph shows that between April and June 2020, approximately 2.8 million transactions on the website were successfully completed. These completed transactions moved an average of 19,800 Bitcoin (BTC) per month, which Blomberg found, meaning “a slight increase over the first months of the year”.
Even if Blomberg argues that these statistics are evidence of “a healthy level of activity on the platform in general”.A look at the historical data confirms that LocalBitcoins still has a long way to go before the previous maximum volumes can be restored.
In an earlier interview with Cointelegraph, Tonoyan himself argued:
“In the early days, people used LocalBitcoins because it was anonymous. But today they use LocalBitcoins because they want a safe and legitimate service for buying Bitcoins. “