If you search for “LocalBitcoins scams” on the web, you will see that there are various accusations by scammed users and others who have been victims of unjustified KYC
There are 187,000 search results for “LocalBitcoins scams” on Google. These aren’t many in proportion because LocalBitcoins has been recognized as the largest P2P (peer-to-peer) cryptocurrency service in the world. The platform serves as a meeting point for buyers and sellers of Bitcoin. Plus, it acts as escrow to protect both parties involved in the transaction. Nonetheless, the business has lately found itself involved in various scandals. Is LocalBitcoins a scam or a legitimate business.
Abuse in the KYC, the fundamental process for knowing your customer
Recently, various user complaints have appeared on the web that they have seen their LocalBitcoins frozen because supposed KYC verifications. It should be stressed that the business is regulated in Finland and is obligated to carry out a KYC according to the laws of the Land. However, it’s interesting that these verifications were also carried out on dormant accounts or accounts with little activity. Data updates? It could be, but the messages inviting the user to delete his account if he doesn’t want to verify his data, and promises to give back his cryptocurrencies in 15 days. The deception is that when these closures are produced, the wallet erases all evidence of the transactions and anything else that could be with the money.
Why should a user have to close their account to be able to get their Bitcoins? As a lawyer, I advise you to never do anything like that: you will erase all data and proof that will permit you to make a legal claim. In just a few days our firm has resolved various cases of KYC abuse and frozen accounts, helping accountholders provide the correct information or directing their claims to the appropriate authorities.
Does the LocalBitcoins KYC prevent scams?
The LocalBitcoins Know Your Customer (KYC) varies depending on the yearly amounts that the person buys or sells. For yearly amounts less than 1,000 Euros, it’s only necessary to share your name, country of residence, email and phone number.
In the case of yearly negotiations greater than 20,000 Euros, in addition to the above, the person will have to verify his phone number by SMS and provide I.D. (I.D. card or passport). In addition, he will have to present a utility bill (electricity, water, Internet, etc.) in his name and with the physical address connected to it.
Despite this verification system, which has no phone or chat support, LocalBitcoins is in the crosshairs of the United States authorities. CipherTrace, a business responsible for blockchain security, asserts that LocalBitcoins has become the favorite destination for stolen Bitcoins, in different parts of the world. One of this company’s reports shows that, in 2019, 12% of Bitcoins sold on LocalBitcoins originated from criminal sources.
Emergence and main characteristics of LocalBitcoins
LocalBitcoins was created in June 2012 by programmer Jeremiah Kangas. It’s headquartered in Helsinki, the capital of Finland. It’s currently available in 198 countries and operates in more than 13,000 cities. It doesn’t work only with Cuba, Syria, Iran and North Korea, nations which have low commercial sanctions with the United States. At the beginning of 2013, the business began generating earnings and this tendency has continued up until these days.
On LocalBitcoin\s, people connect with others interested in exchanging Bitcoin. Only working with this cryptocurrency is possible. The platform uses a deposit in escrow system. This means it receives the payment from one of the two parties and only when the other has complied with the agreement will LocalBitcoins free the money it’s holding in custody.
There are LocalBitcoins platforms for each country. There are even platforms for various cities. From the moment in which the person enters the cite, the system verifies his IP and redirects it toward the LocalBitcoins page of the country from where he is navigating. Nonetheless, it is possible to manually change the geographical location to see the offers from some other part.
How does LocalBitcoins work?
When registering on LocalBitcoins, the person creates his own Bitcoin wallet. Then, he must indicate how much he wants to buy, the type of currency and payment method. Continuing, he selects from the list of announcements, the offer that most interests him. Here, it is key to choose a seller who has a good reputation and has made several prior operations as a way to avoid a scam.
The following step is to click on “Buy”. For this, you have to indicate how many Bitcoins you want to buy and you can send a message to the seller. When you have completed the payment, you will have to inform LocalBitcoins and the seller that “you have paid”. Nevertheless, as we have already discussed, the platform holds onto the money. At hat moment, the seller sends the Bitcoins to the wallet created by the user on LocalBitcoins. After proving that everything is correct, LocalBitcoins frees the money, which goes into the seller’s account.
Various reports appearing on communication media reflect other scams with LocalBitcoins. For example, the Scientific, Criminal and Forensic Investigation Unit of Venezuela stopped, at the end of May this year, two individuals who scammed more than 30 people for sums over 136,000 dollars on LocalBitcoins.
The method used by the scammers was to contact people interested in buying Bitcoins. They told them it was better to make negotiations outside of LocalBitcoins, in order to pay less in commissions. The unwary Venezuelans sent their money and then the scammers cut off all types of communications and never sent the Bitcoins. The complaints to LocalBitcoins for them to collaborate and deliver information about the scammers were unsuccessful.
Commissions charged by LocalBitcoins
Registering as a buyer and seller on LocalBitcoins is free. The platform charges users who place announcements 1% for each completed transaction. Transactions between LocalBitcoins wallets are also free.
When the user wants to withdraw from his wallet the amount of cryptocurrencies custodied in his LocalBitcoins wallet, he will have to pay a fee. This sum will depend on the rate, at the time, of the Bitcoin blockchain.