Bitstamp: Unverified Bitcoin Accounts at Risk of Government Seizure

Bitstamp will close select, unverified user accounts in 28 days, potentially handing over information to authorities at this time.

AccessTimeIconOct 16, 2014 at 10:01 p.m. UTC
Updated Sep 11, 2021 at 11:15 a.m. UTC

Bitstamp announced today that select users who fail to verify their accounts within the next 28 days risk having their balances forfeited to regulatory authorities.

One of the largest bitcoin exchanges in terms of daily USD trading volume, Bitstamp stated that all users who fail to go through its account verification process will be deemed to have violated its terms of services and be subject to the related penalties.

In statements to the press, the company acknowledged that while some customers will complain about the decision or take their business elsewhere, the move is necessary given the demands and goals of its global platform.

Bitstamp wrote:

"We believe it makes good sense for us to act in a conservative fashion and to do our best to safeguard the integrity of the system. Each day, each minute, each second, Bitstamp provides an online exchange in which we match buyers and sellers, and through these myriad transactions, help to set the real-time value of bitcoin for use by merchants and customers around the world."

The company added new clarity in statements as well, suggesting that the blog post only applies to customers whose accounts have been inactive for more than one year.

Notably, Bitstamp already reserves the right to cancel accounts that have not been verified despite its "good faith efforts". For example, accounts that have been inactive for six months or longer may be transferred to a third-party escrow.

The news comes more than one year after the bitcoin exchange first notified customers it would begin taking steps to ensure its compliance with relevant financial regulations on 4th September, 2013. At the time, Bitstamp indicated bitcoin and bank transfers would soon only be available to verified customers.

Government involvement a possibility

Bitstamp suggested in statements that the reason for the policy was its need to abide by anti-money laundering (AML) and know-your-customer (KYC) rules in the UK. Further, Bitstamp offered additional details as to how account closures may be handled as well as the type of entities that could be involved.

Bitstamp said that accounts and account balances could be transferred to a third-party administrator or government authorities, who may in turn determine the ownership of any funds. Still, it cautioned that "the exact mechanism has not yet been determined".

"After the due diligence process is complete, the remaining funds will be subject to government seizure for uses hopefully related to consumer protection and law enforcement education in this new area of commerce," the company said.

No forfeited customer funds, it said, will go to the exchange itself.

Limited effect

While Bitstamp said it understands the desire of some customers to remain anonymous, it suggested that the program will help it maintain a leading edge over other international exchange offerings, which it expects to announce similar policies soon.

Bitstamp, which is registered in the UK but based in Slovenia, suggests in its own AML policy that it believes the company is currently unregulated, and that it does not fall under the country's AML and counterterrorist financing (CTF) obligations.

Still, the company confirmed its commitment to following regulatory best practices in statements, saying:

"Bitstamp has long had the strictest KYC policies and transaction monitoring of any exchange."

Bitstamp went on to reiterate that it believes the one-month notice is sufficient for its customers who may be affected by the closure of their accounts, and further cautioned that it believes only "a tiny minority of customers" will be affected by the move.

Images via Bitstamp; Shutterstock


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