If you know anything about crypto exchanges, you know that they’re often not the most secure places in the world. Hackers target exchanges over individuals. Hacking an exchange often leads to far more lucrative payoffs than targeting one person.
Aside from stealing currency, hackers are realizing that exchanges are the perfect place to breach to obtain user data. This data, like passport information, can later be sold on the black market.
Here we will look at the different types of information that exchanges collect about you and how this could be problematic in the long run.
Types of Information Exchanges Collect
The first and most obvious information that an exchange collects from you is your cookie information. Countries that fall within the EU GDPR legislation do offer users a little extra control over the information they share, but more often than not, the options are to agree to being tracked or leave the site.
Using a VPN is a common tactic used by crypto traders, and this works well if you select a good VPN. However, aside from the actual digital footprint you leave whilst visiting an exchange, a growing number of exchanges want lots of personal information.
This at the most basic level is an email address and username, which allow users to sign up and use the services provided by the exchange. Many crypto users feel this is a fair trade-off in order to use the service, but despite it being considered fair, it isn’t a popular tactic.
More and more though, crypto exchanges are pushing user data gathering further, and now a large portion of exchanges require KYC checks.
KYC (Know Your Customer) checks are a regulatory tool to verify a user’s identity using a form of official ID. The ID required can vary from crypto exchange to crypto exchange, but normally they are one of three things:
- Government ID card
- Driver’s Licence
An exchange user is then required to either supply a picture of the ID or, a less common but sometimes an option, provide the reference number on the ID. In some circumstances, alongside the picture of the official ID, a user has to also take a selfie that can be matched against the ID.
The majority of crypto exchanges will now carry out KYC checks either upon signing up or if you meet a daily trading threshold. Thankfully, there are platforms that allow you to work anonymously. You can easily conduct a crypto exchange without ID verification on Godex — an incognito service that ensures security, speed, and fixed rates.
Why This Is Problematic
There are four reasons that this is problematic. The first is that crypto exchanges are largely unregulated, and most crypto trading falls in a regulatory grey area. This means there is actually NO requirement for a crypto exchange to collect this information and as a result, crypto exchanges are purposefully invading your privacy to get the information they do not need.
Second, the information collected is rarely stored in a safe and secure manner. Sometimes exchanges switch between storage suppliers and request the ID verification again instead of paying to migrate the data across. This is often done under the guise of “we need to check if the ID on file is up to date”.
Over the course of many years, your ID could be saved in more than one location, and you may never be able to find out who has a copy of the data somewhere.
Third, crypto exchanges get hacked, and there are no two ways about it, they aren’t the secure haven they want you to believe they are. While the primary goal of hackers is to get funds, data breaches are also common, and data is harvested to sell to criminals. There is a lot that a criminal can do with your ID, such as apply for a loan, use it as their own ID, or even commit a crime with your ID.
The final reason this is problematic is that government bodies are already taking legal action to secure user data. This could be to monitor who has crypto and tax them on it or to enforce regulations on individuals. The SEC has recently applied to Kraken for its user data, which has so far been denied, but if it goes through a legal channel, it is a coin flip which way the decision goes.
Advantages of an Incognito Exchange
As you might have gathered, finding an incognito exchange is a great idea as it allows you to keep your anonymity and avoid the countless problems that can arise from supplying your ID or information to an exchange.
These headaches come in many forms, both legal and illegal, and it is no surprise that exchanges that promote anonymity are getting used much more than before.
Which Exchange Is Incognito?
There are a few exchanges that offer anonymous trading. Binance is a large exchange that offers no ID checks up front. It is worth noting that this exchange also has thresholds where they may ask for ID if you transact over a certain amount in a 24-hour period.
For no ID checks whatsoever and no limits or daily thresholds, the exchange to use is Godex.io, which has complete anonymity.