Kucoin agrees to ban New York residents and pay $22 million in settlement

Crypto exchange Kucoin has agreed to pay $22 million to the State of New York and to bar residents of the state from using its platform, according to a stipulation and consent order filed in the New York Supreme Court on December 12.

Stipulation and consent order filed on December 12. Source: Supreme Court of the State of New York.

According to the order, Kucoin admits that it “operates a cryptocurrency trading platform on which users, including users in New York state, can purchase or sell cryptocurrencies which are securities or commodities as defined under the laws of New York state and that Kucoin is not registered as a securities or commodities broker-dealer.” In addition, Kucoin “admits that it represented itself as an ‘exchange’ and was not registered as an exchange pursuant to the laws of New York State.”

Kucoin has agreed to close the accounts of all New York resident users within 120 days and to prevent New York residents from obtaining accounts in the future. In addition, it will restrict access to withdrawals only within 30 days, leaving the remaining 90 days available for users to withdraw funds.

The exchange was once known for its pro-privacy policy that did not require users to comply with Know Your Customer or Anti Money Laundering (KYC/AML) regulations. The exchange only accepted cryptocurrency for deposits and withdrawals and therefore did not need banking partners who might require such compliance. It restricted withdrawals from non-verified accounts to less than 5 BTC (approximately $206,000 at the current price).

For users who made withdrawals smaller than this, the exchange offered the ability to buy or sell crypto without needing to divulge personal information. This theoretically allowed users from countries where Kucoin did not have a license to gain accounts at the exchange, since the exchange had no way of knowing who these users were.

On June 28, Kucoin ended this long-standing policy by announcing mandatory KYC for all users. It blocked all deposits from non-verified accounts and halted all services for these users after July 15, although withdrawals remained open. The December 12 settlement confirmed that some of these users were New York residents.

Related: Privacy is not the core feature of Bitcoin — KuCoin CEO

Kucoin does over $1 billion in volume per day and has over 2 million weekly visits to its website, according to data from Coingecko.