Make Crypto frictionless (again)
I recently received an email from my friend and crypto-mentor, recommending a new investment app called Voyager. As with all those emails, this one included a reference code, promising $25 in BTC, after your first $100 transaction.
This came after a long conversation we had about how regular folk would gladly partake in some of the speculation-free (or speculation-light) crypto products, if only the fiat -> initial crypto process could be made simpler *.
My Voyager onboarding experience
Equipped with these novel ideas, I decided to give Voyager a try. I read some reviews, and downloaded their app to my Android phone (fair warning: Android version is still in beta). Here's what followed:
- Downloaded app
- Created user ID and password
- Provided my real name
- Provided my address and phone
- Provided date of birth
- Provided SSN (after a long thought of whether the whole thing is worth it)
- Get told that I'll be emailed about a decision
- Find email in spam folder, telling me everything I provided is not enough to identify me
- (it was good enough for my bank, cable company, landlord etc, but oh well)
- Now I need to upload an ID photo, and a photo of me holding the ID
- Get told I need to use a template, with a link to a file on Dropbox
- Freak out, ask myself who did I just provide my address, DOB and SSN to
- Take a deep, calming, breath; Contact Voyager Support to delete my account
- Share the above with Support when they ask me to review my onboarding experience
The Investopedia review of Voyager includes the following enlightening paragraph (emphasis mine):
Even though cryptocurrency trading is very lightly regulated at present, Ehrlich and his team believe that there will be rules put in place in the near future that will be similar to the rules that govern online brokers. “We put a lot of credibility into the know-your-customer process, and we are making sure we are abiding by existing broker-dealer rules,” notes Ehrlich.
So they're going out of their way to enforce something they are still not required to enforce, along the way trading perceived credibility for friction and loss of customers. Nice.
My take on KYC/AML
Governments all over the world rushed to protect us from the threats of terrorists trading cryptocurrencies on Coinbase. All the while, major banks launder and transfer billions in fiat. The Panama Papers recently demonstrated that this practice is alive and well, and going strong. But no, the real enemy of democracies everywhere is Joe Shmoe trying to buy 1 Ether with money he already paid taxes for, residing in one of the aforementioned banks. Let's submit them to digital torture, and give it nice acronyms like "Know Your Customer" and "Anti Money Laundering", all the while leaving huge holes in our monetary laws, big enough for companies and individuals to pass the true fortunes of the world through.
I find it interesting that in any venture to protect the "law abiding citizens", it's those same citizens who have to pay with their privacy, trust and time. There are easy and simple ways to verify who I am. Asking for more an more PII (personally identifiable information) is not only creepy - it's outright dangerous.
As a US citizen, I have no illusions: my data is out there already, victim to one of the many data breaches in recent years (thanks, Equifucks). That does not mean I need to trust one more company with more PII. And when they keep adding more and more items they need, it behooves us to ask: why do other financial services and utilities require less PII to provide services than a crypto exchange? And why do many of those crypto products volunteer to collect more, and prove they're holier than the Pope? Isn't the crypto creed privacy-centric?
* What do I mean by "simpler process"?
- You could explain it to a regular human, who owns a bank account and a credit card, in less than 3 minutes, and without having to go into the history of cryptography and Satoshi Nakamoto.
- You can start using it quickly - let's say no more than an hour from your initial decision to try it.
- You can easily use your existing capital, means of payment, and knowledge to start using the products.
- You can easily reverse course if you feel like you went in too deep - i.e. get back from crypto to fiat (taking into account you might lose some money to fees or market friction).
- You will not have to go through a progressing series of creepy questions, that not a single service provider on Earth would dare ask you, in order to partake in their offering.
Let's fix it
If I can prove to you access to a real bank account - the ownership of which already required me to prove my real identity - than it should be good enough for you, dear service provider. By all means, add one more authentication factor (to make sure no one took over my bank details), but that's it. My DOB is meaningless, and can be easily found in one of the millions of data dumps on dark sites (as is my address and SSN probably 😒).
If we want common, tech-averse (or at least, not tech-savvy) users to join us in the crypto frontier, we need to remove friction, not add to it.