Traders now have a way to bypass KYC
The Pacific island nation of Palau is offering a “digital residence” for $248 a year without having to travel to the country.
As writes Wall Street Journal, the opportunity to obtain a digital residence has especially attracted the attention of cryptocurrency traders. They are looking for alternative access to platforms that are banned in their countries of residence.
How Palau Digital Residence Works
The Palau government’s digital living technology platform, RNS, was launched in January 2022 and provides a digital and physical identity. To be approved, applicants must pass a money laundering check, share contact information, and provide an identification form.
Approval takes about 10 days. The residence is provided for one year, five or 10 years, you have to pay $248 per year. The Palau Resident ID can be used for identity verification (KYC) at various businesses around the world, from bars to cryptocurrency exchanges.
Digital residency has proven to be especially popular in the crypto industry. RNS suggests that traders use the document to circumvent the country’s bans on cryptocurrency services, which prohibit access to certain unregistered exchanges and risky investment products.
“Don’t lose access to cryptocurrency. In 2023, the cryptocurrency was restricted to Canada, Argentina, and the US. Get a second ID. From the Republic of Palau. Get access to any major exchange,” RNS said in a statement.
As with any ID, the government cannot control how a person uses the document, according to Jay Anson, head of the digital residency program. However, RNS does not encourage the use of a secondary ID to circumvent cryptocurrency bans.
How Binance is connected to Palau
Binance founder Changpeng Zhao traveled to Palau last June to launch non-fungible token (NFT) identities. Then he assured that the program is “very innovative.” However, Binance then said that after careful review, they decided not to invest in this program and officially partner with Palau.
In addition, Binance US customers have been able to join the platform despite being banned from serving US customers. However, the exchange says it has controls in place to prevent people from restricted countries from gaining access through a Palau ID. In total, the platform has about 2,000 users with Palau documents.
However, it is not known whether Palau is mentioned in the Securities and Exchange Commission (SEC) lawsuit. On June 5, the SEC filed 13 charges against Binance related to illegal activities in the United States, fraud with clients’ money, and a number of other serious violations.
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