ChainDD Exclusive | OKEx’s under Suspicion of Censoring and Controlling User Assets via KYC? Star Xu Being Questioned Again

Abstract : It is highlighted in the user license agreements that, "OKEx has the right to suspend any account any time for any reason".


Jun 23

In the digital currency investment market, characteristics of the early industry development and legal loopholes have caused difficulties in regulatory and right protection aspects. Due to a lack of rules and regulations in the field of digital currency, investors are easily taken advantage of when dealing with cryptocurrency exchanges.

The characteristics of blockchain decide the absolute control of exchanges over investors' funds, accounts, and operations. Under-developed supervision has increased chances for exchanges to abuse their control power. That is to say, exchanges are able to use all approaches to steal user's assets, which happened quite often during 2017 and 2019 when the digital currency investment market was booming.

Power abuse is often found when cryptocurrency exchanges are entitled to absolute control over user accounts. OKEx is a well-known digital currency exchange within the industry. According to CMC, a crypto asset data supervisory platform, and AICoin, the trade volume of OKEx is between USD 3 billion and USD 5.7 billion within only 24 hours. In particular, this exchange has the largest market share and the biggest number of individual investors and intuitions in the field of digital currency derivatives.

Zhang Wei, an investor, told us his own story with OKEx. In the afternoon of April 29, Zhang tried to withdrew 7000 USDT from his OKEx account to a wallet on a third-party payment platform, but his account was locked by the exchange. That is to say, the amount of the fund in his account was not allowed to withdrew, transfer or sell out. Later, OKEx explained that Zhang's attempt to transfer his USDT to another platform activated KYC as he was suspected of transferring dangerous funds to an OTC market.

The process to unlocked his own account was very difficult. In the following month, Zhang talked to customer service with OKEx for numerous times. At first, customer service required his ID card, bank statement, income source statement, reasons for withdrawing and transaction records on other platforms. However, after doing what the customer service had said, Zhang still found his account and funds locked. The customer service neither helped him unlock his account, nor offered a solution. Instead, all Zhang got was "please wait with patience".

Guo Yatao, a lawyer with Lianfa, commented that, "It agrees with regulatory requirements that users should provide information for KYC. But it should also be noticed that information gathering should be in accordance with both process requirements and the necessity principle."In OKEx's transaction rules, KYC is defined as following:

"The account of the user will be locked or even suspended when he/she is suspected of frauds or any attempt to scheme, transferring currency to any highly risky platforms which include but not limited to coin holder platforms, online gambling platforms, high-risk platforms that are not open for registration, money-laundering platforms and platforms with low risk-control capability in anti-fraudulent activities or any high-risk asset transference platforms."

It is also highlighted in the user license agreements that, "OKEx has the right to suspend any account any time for any reason". This can be translated as even if Zhang provided all necessary information, exchanges are entitled to lock his account indefinitely and put their assets to a life sentence.

Guo Yatao believes it is very obvious that this kind of regulations violate the fair and reasonable principles. Several major digital currency exchanges have user license agreements that impose unequal rights and economic interests between users and exchanges. This is unfair under China's legal context.

However, it is worth noticing that all these digital currency exchanges have not registered in mainland China yet. Therefore, all the terms in their user license agreements do not apply Chinese laws and regulations. If, unfortunately, any dispute occurs, it will not be resolved or settled in China.

The regulation agency responsible for OKEx's digital currency transaction operations in China is not clear, and so are its rights and obligations. But this has not stopped the exchange from having enormous and complex entities and business setting systems in China and other countries. All these pose obstacles for Chinese users to defend their own rights and interests against exchanges whenever a dispute occurs.

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