Changelly, a popular cryptocurrency exchange, has recently revealed it may withhold users’ monero (XMR) if its security system deems it necessary. The security system, per a company spokesperson, may be triggered when users exchange large amounts.
According to The Next Web, the company’s revelation came after a Reddit user noted he or she attempted to exchange some cryptocurrency for XMR and saw the platform classify its transaction as “high risk.” As a result, the funds were quarantined until the redditor’s account was cleared.
In the situation’s aftermath, a Changelly spokesperson reportedly confirmed the exchange can withhold suspicious transactions and hold users’ funds hostage until their accounts are cleared. Per the spokesperson’s statements, the exchange’s risk management system seemingly checks large amounts of currencies about to be converted to XMR.
This, as XMR is a privacy-centric cryptocurrency that hides who the sender and recipient of its transactions are. The spokesperson noted, however, Changelly holds no prejudice towards the cryptocurrency.
We have no mistrust of and prejudice towards users trading XMR. The matter relates to a Know-Your-Customer procedure that we had to implement due to the increased number of money laundering cases via our service.
Notably, Changelly may keep a users’ funds if their accounts aren’t cleared. Per the spokesperson, if a customer refuses to “provide the required data,” the company can’t “simply return coins as we wouldn’t like to operate and transfer coins that might be potentially stolen or raised by fraud.”
If a user does provide the exchange the information it needs, then the funds are “immediately released” and some users may even be white-listed so they won’t see their transactions get stuck in the future.
Per the Next Web Changelly may be withholding users’ funds due to regulatory pressure, as regulators aren’t too fond of privacy-centric cryptocurrencies. As CryptoGlobe covered, Japan’s Financial Services Agency (FSA) has pressured crypto exchanges in the country to delist privacy coins like monero, zcash, and dash.
As reported, data security firm CipherTrace revealed in July that hackers managed to take over $760 million from cryptocurrency exchanges this year, as crypto exchange theft and money laundering surged. Among the most notable crypto money laundering cases is that of Backpage’s CEO Carl Ferrer, who plead guilty to using cryptocurrencies to launder money back in April.
While cryptocurrencies have been gaining a bad reputation for their use in these cases, research from crypto derivatives exchange BitMEX has noted it’s easier to launder money with the US dollar or with real estate than with cryptocurrencies, given the market’s relative “illiquidity.”