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Since June 2023, KuCoin’s Bitcoin reserves have dramatically declined by 77%. KuCoin implemented KYC requirements, after which its Bitcoin reserve experienced a significant downward shift. Users withdrew more than 14,000 BTC from the platform as privacy concerns grew intensely during that period.
According to the Onchain School data released on June 5, 2023, KuCoin‘s public Bitcoin reserves held 18,300 Bitcoins. When rumors spread regarding KYC enforcement on June 5, users started making extensive withdrawals from the platform. A monthly assessment indicated a 77% BTC decrease from 18,300 to 4,100 coins at KuCoin by June 28.
KuCoin loses over 77% of its BTC reserves following mandatory KYC announcement
“On-chain data shows a drop from 18,300 BTC to just 4,100 BTC, marking a net outflow of 14,200 BTC — a 77.6% decrease.” – By @onchainschool pic.twitter.com/DCnjEHbTdv
The announcement of KYC requirements and limitations for unverified accounts came out exactly at the same time. On July 15, KuCoin declared that KYC verification would become necessary for all users seeking trading access. Outflows of Bitcoin from KuCoin became stronger after the organization officially confirmed compliance changes that likely motivated users to withdraw their assets.
Stakeholder responses to compliance changes became evident through heightened BTC outflows following the official announcement. The ongoing decline in industry reserves did not affect KuCoin, which demonstrated exceptional speed and volume performance. KuCoin’s operations maintained exceptional speed and volume while other exchanges faced industry-wide declining reserves.
KuCoin implemented rapid KYC verification procedures after the United States regulatory bodies focused more attention on the exchange. PEKEN GLOBAL LIMITED and its subsidiary KuCoin faced prosecution from the U.S. Attorney’s Office in 2024. The company received official charges from authorities because it failed to follow KYC and AML regulations repeatedly over multiple years.
The court documents revealed that KuCoin neglected registering with FinCEN as a money services business. The exchange faces allegations that it enabled billions of dollars of unmonitored transactions by neglecting proper oversight. According to prosecutors’ allegations, KuCoin obtained over $184 million in customer fees while neglecting key regulatory responsibilities.
KuCoin reached an agreement with authorities that included paying a $297 million penalty and being prohibited from operating in the U.S. for a two-year period. The platform implemented additional KYC verification procedures at all levels, starting from broker accounts and sub-account verification. KuCoin implemented the updated measures to satisfy international regulatory requirements.
During the first phase of 2024, KuCoin utilized API integrations to enforce KYC requirements on broker sub-accounts. The implementation of single-instance identity verification became mandatory for every broker account that needed changes. KYC compliance regulations did not need to be enforced on master accounts that used traditional sub-accounts as links.
The policy modification introduced specific problems because various platform users maintained previous access methods. After the update, all users encountered restricted platform functionality when they did not verify their identity. The change in platform activity rules from prior KYC requirements included this particular group of users.
The policy update’s API-only submission methods became a major technical hurdle for broker services attempting their platform migration. Web-based options were missing from the system, creating complicated integrations that delayed operations for affected users. The platform became more secure through KYC compliance but experienced declining liquidity due to investors who valued anonymity leaving the trading world.
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