In the world of cryptocurrency, controversy is not all that difficult to come by. This is especially true when it comes to exchanges and trading platforms which share client information with the government. After the recent Coinbase-IRS debacle, it now seems Bitfinex is handing over a lot of customer information to the authorities as well.
Bitfinex Stirs the pot
While there are good reasons for a cryptocurrency exchange to be in active talks with a government, developments like these usually cause some negative backlash. In the case of Bitfinex, it seems the company is actively cooperating with the government of the British Virgin Islands. This move is the direct result of allegations that cryptocurrency had been used for tax evasion purposes, among other nefarious activities.
In a way, this is a commendable course of action by the Bitfinex exchange. Criminals who obtain cryptocurrency in any shape or form will often rely on exchanges to convert their balances to fiat currencies. However, exchanges perform thorough KYC and AML checks, which makes them far less appealing for criminals.
Even so, users of the Bitfinex exchange may not be all that transparent about why they use this particular trading platform. It appears that tax evasion is a very big concern for the exchange right now, which is why working with the British Virgin Islands government simply makes sense. Customers of the exchange have already received a request for their tax information.
The company explained its decision as follows:
Under the laws of the British Virgin Islands (which are applicable to entities organized in the British Virgin Islands, including us), we are required to report certain account information to the [British Virgin Islands] government. The government of the [British Virgin Islands] may then exchange that information with the tax authorities of the customer’s country of residence.
While some people may oppose this decision by Bitfinex, the company is taking this action for the right reasons. Protecting cryptocurrency users at all times is the number one priority for every exchange and trading platform in the world. This also means thwarting any tax evasion effort taking place through these centralized trading platforms. It will not be easy to do so, but cooperating with the local authorities can make big things happen fairly quickly.
In the long run, developments like these will make a positive impact on the cryptocurrency industry. Bringing more legitimacy to Bitcoin and altcoins is an ongoing struggle, yet the situation is fast improving. The latest effort by Bitfinex will help legitimize this industry even further, even though the company may lose a few trades in the process.