Anyone looking to conduct any shady business on peer-to-peer Bitcoin exchange LocalBitcoins will now have a more difficult time doing so.
The exchange today announced that it has teamed up with Elliptic—a crypto tracing firm that provides asset risk management solutions. LocalBitcoins plans to use Elliptic’s transaction monitoring software to prevent the illegal use of the Bitcoin exchange’s services.
“By choosing @elliptic, LocalBitcoins have demonstrated their commitment to eliminating illicit use of their platform,” said Tom Robinson, Elliptic’s co-founder and Chief Scientist.
— LocalBitcoins.com (@LocalBitcoins) July 28, 2020
LocalBitcoins has long been criticized for being one of the top destinations for dirty Bitcoins around the world. According to a report from blockchain analytics firm CipherTrace, the Finnish platform ended 2019 by earning the dubious distinction of having received the most illicit crypto assets throughout the year. It’s been a recurrent pattern since 2017, according to the firm.
The report claimed that Finnish exchanges received 12.01% of all crypto funds associated with criminal activity, and LocalBitcoins alone accounted for more than 99% of all such funds.
LocalBitcoins partnering with Elliptic appears to be an attempt to confront this problem head on.
“We are pleased to be partnering with the global leader in blockchain monitoring,” said Sebastian Sonntag, CEO of LocalBitcoins, in a statement. “Elliptic will enable us to achieve the highest levels of compliance while increasing operational efficiency and reducing costs. We will continue to invest heavily in AML and KYC to maintain a secure and trusted platform for our valued customers.”
But in solving one problem, the exchange may be creating a new one for its business.
The recent KYC and anti-money laundering (AML) policies implemented by the LocalBitcoins team have caused some privacy-loving purists to jump ship, including traders who may be operating in countries that are sanctioned by the United States.
This may be one of reasons that LocalBitcoins has lost market share to its competitors, such as Hodl Hodl, which have taken the opportunity to grab users in regions like Latin America and Africa, offering the privacy, diversity of services, and ease of use that LocalBitcoins can no longer provide.
For LocalBitcoins, though, that tradeoff appears to be worth it.