In 2012, I wrote about bitcoin banks and websites as I was researching the usefulness of bitcoin. I signed up with a few and tried them out. Most of them seemed like amateur sites written in a slapdash fashion in order to start making money; at least bitcoin money. Some of them claimed I needed to prove my identity to avoid Anti-Moneylaundering and “Know your Customer” laws. Turnabout is fair play. I started investigating the websites and the people behind them. Basically, my question came down to “Should I trust my identity to these companies?” In general, the answer was no. They seemed like shell corporations of shell corporations. They seemed to avoid talking about who/what ran the companies. They didn’t share anything about their security nor their operations. In hunting down their addresses, some of them were not listed at the address they claimed. I happened to be in London and stopped by one of the “banks”. They didn’t answer the door. I decided
that if they cannot provide their identities, I cannot provide mine. My accounts were closed.
## It gets slightly worse
When you ask any real business to prove they are real, they can. The employees think it an odd question, but not something objectionable. Mt. Gox stands out because their response was not only abusive, but contemptuous. How dare I question their legitimacy was what I took away. I noted that the worse they respond, the less likely I want to do business with them. I was then told I had to provide a copy of my passport, a utility bill, and my driver’s license. And because I’m a US citizen, I had to use their US counterpart for all transactions. I again asked for proof of business and identity. However, I also looked up the US branch of Mt Gox in the state commerce database (I think it was Delaware). Turns out, it didn’t exist. It was some other business doing business as, but even still not for currency exchange nor money changing. I decided they were too risky. I moved on.
However, before my accounts were automatically closed by the “bank”, I did get a chance to explore around their sites. I quickly realized these were not places to keep anything of value; even at the little value a bitcoin held. I did buy some bitcoins with US dollars and then quickly moved them to my own wallet.
This left me with the options of using BitInstant or LocalBitcoins. BitInstant seemed great. I could use MoneyGram to get USD converted to bitcoins. Sometimes I had to show my driver’s license to the store hosting the MoneyGram, but generally not. Of course, there were cameras everyone pointing at the MoneyGram phones. However, I wasn’t worried about giving up my identity so much as I was worried about ZipZap or BitInstant stealing my money and not giving me bitcoins. However, it always worked and didn’t require me to maintain a wallet on some unknown server.
originally published at wiki.lewman.is