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Vault of Satoshi's logo.

Vault of Satoshi’s logo.

In an attempt to halt a flood of fraudulent transactions from the Interac payment system, Canadian digital currency exchange Vault of Satoshi (VoS) announced yesterday that it would be adding another layer to its customer-verification process. The concept was simple: Take a selfie while holding up a hand-written note and a government-issued ID. According to VoS co-founder Michael Curry, the idea was meant to be a “clever and reasonable” way of ensuring that VoS customers were who they claimed to be.

What Curry and the VoS team didn’t count on, however, was just how seriously many bitcoiners take their privacy. The backlash against the idea was near-instant and intensely hostile. Given that a “selfie” isn’t required under Canadian rules for digital currency institutions, it seemed to many that VoS was gathering highly personal customer information for its own purposes. Several users posted angry threads on popular internet forums, and at least a handful completely closed their accounts rather than comply with the new rules.

Curry and the VoS team clearly got the message. Less than a day after announcing the new rules, the exchange reversed its position on the selfie policy. Posting to Reddit, Curry apologized for his company’s handling of the situation.

In the past 24 hours, we’ve had a lot of negative attention with regard to our policy on “selfies”. … This was put in place as a knee-jerk reaction to the influx of fraud that came with instant online Interac deposits. … We didn’t realize at the time that it would cause such an uproar about privacy, but we can understand where the community is coming from. Effective immediately, we will no longer be requiring the use of “selfies” for verification purposes.

One interesting twist on this story is that San Francisco-based cryptocurrency exchange Kraken implemented a similar policy several weeks ago, with only minimal customer backlash. Kraken almost exclusively serves the European bitcoin market, where banking regulations vary considerably depending on the region and where anti-money laundering and know-your-customer rules are often far more stringent.

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