When it comes to entrepreneurship in the realm of bitcoin and other cryptocurrencies, not many individuals have been around as long as ShapeShift CEO Erik Voorhees.
Voorhees is a longtime critic of governments forcing bitcoin companies to collect information from their users, and last year ShapeShift began collecting personal data on their customers for the first time.
In a recent interview with Peter McCormack on What Bitcoin Did, Voorhees talked about how this move to follow Know Your Customer (KYC) guidelines had an extremely negative impact on his business.
The Bear Market Didn’t Help.
During the interview, Voorhees was asked how much of ShapeShift’s January layoffs were due to the 2018 crypto asset bear market and how much were due to KYC compliance.
In his response, Voorhees indicated that both issues were hugely impactful in terms of the layoffs.
“It was expected,” Voorhees said in terms of the bear market. “You know, I expected things to decline by 80 or 90 percent just from the psychological bubble effect.”
Why KYC Compliance Was an Issue.
Voorhees added that compliance with KYC guidelines was also a huge piece of what led to the layoffs at the company. Although, the issues with KYC were a bit different than what many would likely assume.
“It wasn’t just the people that arrived to the site as individual customers [who] had to decide: Am I okay with creating an account or not? Most of our volume came through partners — wallet partners,” explained Voorhees.
According to Voorhees, mobile wallet and other software users were able to do crypto conversions in these apps thanks to ShapeShift’s API.
“That was the majority of our business,” added Voorhees.
Since wallet partners did not want to require their users to go through ShapeShift’s KYC process, many of them dropped the integration.
“The entire customer base dropped very close to zero very quickly. And we expected that,” said Voorhees.
Going forward, ShapeShift is looking to turn their business into a sort of non-custodial alternative to many of the services Coinbase provides their users today.