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I am doing a research project about Crypto regulation. From what I read, Know Your Customer and Anti-Money Laundering compliance from exchanges are legally required in the US. However, a quick search shows several crypto exchanges that obviously do not comply with these regulations (they don't ask users any identification when purchasing).

How are these exchanges slipping through? Some have been around for multiple years and a glance tells me they are doing fine.

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  • My thoughts would be that there are much bigger fish to focus their AML efforts on. Out of curiosity, which exchanges are you referring to? Only fiat<->btc one I've heard of is bisq
    – Maksim
    Dec 3 '21 at 1:36
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It depends where the selling company is based. If you're able to buy BTC for example in Switzerland (from the US), you can get BTC by just giving them your bank id (also known as KYC-light).

You need to keep in mind that there are also decentralized exchanges like BISQ and also marketplaces for buying and selling BTC in person for cash.

Bitcoin is a digital peer-to-peer cash. It is nearly impossible for any entity to control and regulate it.

By the way, which exchanges did you find that do not comply with KYC or AML?

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  • Well, one of them was Shapeshift. from your answer, I am guessing that because shapeshift is based in Switzerland, they avoid US regulations and therefore do not need to perform KYC processes?
    – Eric Xue
    Dec 6 '21 at 23:40
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    Exactly! Shapeshift (though it's a shitcoin casino) uses the swiss laws. This means that you can buy cryptocurrencies by giving them the debit card number from which you are sending them money from (KYC-light). This is possible because a full KYC process in Switzerland is only needed from a volume of 900$ a day but this rule will be changed at the end of the year. From 2022 the allowed KYC-light volume is only 1000$ a month! By the way, this process may not reveal as much data as a KYC-backed purchase but having your debit card id makes it possible to track back transactions!
    – zerotobtc
    Dec 7 '21 at 7:03
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The answer is pretty simple, in general:

  • Some portion of the market finds value in using KYC-free exchanges.

  • Most, but perhaps not all jurisdictions require businesses to impose KYC rules.

  • Savvy internet users will generally find ways around jurisdictional restrictions that they don't want to comply with.

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  • This makes sense, but could you give an example of some exchange doing this in the real world?
    – Eric Xue
    Dec 4 '21 at 23:32

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