Binance Blocks Withdrawals to Privacy-Focused Bitcoin Wallet Wasabi
- Beware of using privacy-focused options like Wasabi when dealing with centralized exchanges
- Binance “does not tolerate any transactions with gambling, P2P, and especially darknet/mixer sites”
Twitter user Catxolotls, @bittlecat reported that the leading cryptocurrency exchange Binance Singapore has blocked his attempts to withdraw to Wasabi Wallet.
Wasabi Wallet is a non-custodial privacy-focused Bitcoin wallet that offers the feature of CoinJoin.
Because Bitcoin isn’t private by default, one can use tools like CoinJoin to use Bitcoin more privately. It requires multiple parties to jointly sign an agreement to mix their coins making it harder for outside parties to determine who is making which particular transactions.
Not surprised that my transactions are tracked, it's KYC after all
But I'm very concerned that Binance knew I was sending to wasabi, when all I input was a bc1 address, nothing more pic.twitter.com/T6ePjahESY
— Catxolotl (@bittlecat) December 19, 2019
To continue with the withdrawal process, Binance asked the user to submit information regarding the nature of transactions and supporting documents. It also asked for the individuals’ current occupation and annual income range.
The user reported the incident because they were concerned that Binance knew they were using the Wasabi. Coinjoin usage, however, is easy to identify on-chain and exchanges keep track of them to remain compliant with know your customer regulations.
The user got his sats back, “but not without promising Big Brother I wouldn't mix those utxos.” Binance also warned that it “does not tolerate any transactions directly and indirectly with gambling, P2P, and especially darknet/mixer sites.”
This act of account suspension has been seen as an invasion of privacy by the user which is a reminder of the dangers of using centralized custodial platforms.
Bitcoin has been designed to be a peer-to-peer network that eliminates the middlemen and the need for permission from a central authority. As such, Bitcoin proponents call for shunning these centralized platforms and go for more decentralized alternatives.