ShapeShift will be fully embracing DeFi protocols and getting rid of KYC.
The Colorado-based company will now route traders to decentralized exchanges, rather than holding cryptocurrency and being the counterparty in customers’ trades. This change allows it to stop collecting users’ information. Only ether and ERC20 tokens are supported for now.
“Today, ShapeShift is announcing that it has integrated decentralized exchange protocols and is sunsetting its 6+ year business of trading with customers. Because of this fundamental change to our business model, ShapeShift’s users no longer need to provide personally identifying information to us,” wrote CEO Erik Voorhees in a Jan. 6 Medium post.
Despite originating in 2014 as a non-custodial exchange platform guided by an ethos of total consumer privacy protection, ShapeShift implemented know-your-customer (KYC) policies in 2018 as a response to impending regulations. The move lost ShapeShift 95% of its user base.
“…for the past two and a half years, we’ve been engaged in a practice that is not only ineffective, but that I and others find plainly unethical and dangerous: the warrantless collection and surveillance of personal, private information of innocent individuals,” said Voorhees in his post.
Now, ShapeShift is turning the tables on regulators by getting rid of centralized trading activities that trigger KYC policies. ShapeShift will cease all direct transactions with customers, and instead, it will integrate with multiple DeFi protocols and exchanges.
“With this fundamental change to our business, ShapeShift is no longer an exchange or intermediary in any form…We’re a tech company, not a financial institution,” concluded Voorhees.
The announcement enjoyed an overwhelmingly positive reception from the DeFi community on Twitter, although whether or not former users will return to ShapeShift remains to be seen.