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ETN · 22w

The biggest scam in crypto - KYC/AML. Aka why ETN is doomed.

Edan Yago has spent the last seven years engaged in payments using cryptocurrencies, first at Zynga, then as CEO of Epiphyte and now as the founder of a stealth startup developing a meta-stablecoin platform.

Follow him on Twitter here.

The worst-kept secret in cryptocurrency is that many projects are little better than scams: they’ve digested billions of dollars and what’s come out of the other side has been, well… use your imagination.

But what about the ever-increasing, ever-complex, ever-demanding know-your-customer (KYC) and anti-money-laundering (AML) practices required of young fintech and crypto startups when onboarding customers?

These practices have cost us many more billions than all initial coin offering (ICO) scams put together – and what they have produced, in my estimation, is worse than nothing.

They have created an all-pervasive, global surveillance apparatus. A system that keeps billions in poverty, kills innovation and provides an excuse for the banking system to lock out the competition.

Financial exclusion

Stepping back, in 1970, the U.S. passed the Bank Secrecy Act, which weaponized banking and financial institutions, turning them into an unofficial secret police. From then on, anyone dealing in finance was under ever-stricter orders to monitor the activity of their customers, pass details of “suspicious activity” to the authorities and block financial access to undesirables.

The direct cost of this compliance to the financial companies is now in the billions every year. But that is only the smallest part of its social cost.

Similarly to the war on drugs, the U.S. has encouraged KYC/AML regulations to spread around the world. Most countries have enthusiastically adopted them, and those that tried to resist, like Switzerland, eventually bowed to intense pressure. Today most of the countries of the world are joined together – administering the least publicized, most glob...

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