Deribit to mandate ID verification for all traders before the end of the year

Quick Take

  • Deribit, the world’s largest crypto options exchange by trading volumes, will require all users to become verified before year-end, CEO John Jansen told The Block exclusively.
  • Deribit’s plan comes soon after similar action by rival and troubled derivatives exchange BitMEX.

Deribit, the world's largest crypto options exchange by trading volume, will require all users to become verified before the end of 2020, CEO John Jansen told The Block.

The enhanced know-your-customer (KYC) program means all Deribit traders would have to provide proof of government identification such as a passport, as well as proof of residence. "New clients will soon be required to adhere to these market standard preconditions, and current clients will get ample time" to comply, said Jansen.

Currently, Deribit has two levels of KYC. Level 0 — for withdrawals of up to 1 bitcoin and 50 ether — requires basic information such as name, email, date of birth, address, and country of residence. Level 1 — unrestricted withdrawals — needs basic information plus a passport or government ID. It means with the upcoming KYC program, all users will have to pass the Level 1 verification.

Deribit's plan comes soon after similar action by rival and troubled derivatives exchange BitMEX. Today, BitMEX accelerated its KYC program, requiring all customers to be verified by November 5 — three months earlier than its original deadline of February 2021.

BitMEX and founders were charged by the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) earlier this month. The exchange and founders Arthur Hayes, Ben Delo, and Samuel Reed have been accused of operating an unregistered trading platform as well as violating CFTC rules, including KYC and anti-money laundering regulations. Meanwhile, the DOJ filed criminal charges against Hayes, Delo, Reed, and BitMEX head of business development Greg Dwyer for violations of the Bank Secrecy Act.

Deribit appears to be taking extra caution with its upcoming mandatory verification plan, although the Panama-based exchange does not allow U.S. residents to trade on its platform.

"Over the years, we have been quite vigilant in blocking account openings by U.S. persons," Jansen told The Block. "We perform IP access checks on a regular basis, and, actually, we continue to do this as we speak."

Indeed, earlier today, some users highlighted that they received a notice from Deribit, saying that they could be located in the U.S., and thus aren't allowed to access the platform. "These users could be from the U.S., or at least from an IP known to us as a U.S. IP," said Jansen.

"Our experience is that the vast majority of affected users of such checks are actually not U.S. persons at all, but we have to take those actions to do what we can to not have actual U.S. persons on the platform," said Jansen.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.