Kraken Allegedly Introduces Enhanced Verification Procedures for UK Users' Self-Custody Wallets

Kraken Implements Wallet Verification Requirement for UK Users

Kraken has introduced a new verification process for its users in the United Kingdom, citing regulatory requirements. The company has sent out emails to its UK-based users, requesting them to verify their self-custodial wallets.

Verification Measures

In the email shared by Van Straten, Kraken emphasized the importance of maintaining up-to-date information about clients and their account activities related to self-custody wallets. The email mentioned that self-custodial wallets are subject to scrutiny under UK regulations.

Kraken Support later confirmed the initiation of wallet verification requests for its UK users. The communication from Kraken included instructions for users to confirm ownership or control over their self-custodial wallets and provide detailed information if they were not the owners or controllers.

If users fail to respond to the verification request by February 23, 2024, Kraken will impose restrictions on their accounts until the requested information is provided.

Exchanges Increasing Verification Demands

Kraken’s action aligns with a trend among cryptocurrency exchanges that are increasingly requiring users to associate external crypto addresses they interact with. Bitstamp also adopted a similar strategy in early 2021, citing updated regulations from the Dutch government.

Challenges with Self-Custodial Wallet Verification

Self-custodial wallets give users control over their private keys and do not link control to anyone’s identity. This makes verifying self-custodial wallets challenging and has sparked debates on how regulators approach the issue.

Regulators view the lack of transparency surrounding self-custodial wallets as a concern. Consequently, regulated exchanges are now conducting due diligence on self-custodial wallets as part of expanding know-your-customer (KYC) regulations in the digital asset space.