by Joseph Young
Nejc Kodrič, the founder and CEO of leading cryptocurrency exchange Bitstamp, has revealed that the exchange has been opening 100,000 new accounts on a daily basis.
Bitstamp’s Rapid User Base Growth
Earlier this week, a Bitstamp user submitted a complaint on social media in regards to the inefficient verification process of the exchange. Other major trading platforms such as Coinbase, Bitfinex, and Kraken have received similar complaints over the past few months.
On cryptocurrency trading platforms, traders and investors are required to undergo a strict and long process of account verification to increase their daily trading limits. The process often requires the submission of government-issued IDs, bank documents, proof of income, and face-to-face interviews.
Exchanges like Bitstamp, Coinbase, and Kraken, which have millions of users, have struggled in addressing the rapidly growing demand from new users and manually approving verification requests from tens of thousands of users every day.
In response a complaint from a user, Bitstamp CEO Nejc Kodrič stated:
“Please understand that we currently have over 100,000 new accounts opened daily. It is challenging to cope with such surge. We are expanding our capacity to onboard clients faster but this takes a bit of time.”
Even multi-billion dollar startups and exchanges have found difficulty in verifying user accounts within a short period. Consequently, the completion of account verification on major exchanges takes at least a week to several months, because each verification request is manually approved by the employees of exchanges.
Since early 2016, major bitcoin and cryptocurrency markets like the US and Japan have imposed strict Know Your Customer (KYC) and Anti-Money Laundering (AML) policies on the cryptocurrency exchange market. To remain compliant with local regulations, exchanges have been required by financial authorities to ensure that each of their traders undergoes a rigorous verification process to prevent money laundering and fraudulent activities.
Exchanges Have Evolved Into Large-Scale Financial Institutions
Alistair Milne, a highly regarded bitcoin investor and a partner at Atlanta Digital Currency Fund, reported that Coinbase was adding more than 100,000 users on a daily basis in November but the number of newly opened accounts was not consistent.
“Coinbase was sometimes adding 100k users per day a month ago (likely more now). Bitstamp now also reporting 100k/day. Bitcoin is starting to go mainstream,” said Milne.
To cope with the exponential growth rate of the bitcoin and cryptocurrency markets, Coinbase secured a $100 million funding round at a $1.6 billion valuation on August 10. At the time, Coinbase CEO Brian Armstrong emphasized that the newly obtained capital will be used to expand customer support teams to streamline the account verification process.
“We’ll be using this new funding to continue scaling even further. Specifically, we will: Increase the size of our engineering and customer support teams to improve the customer experience. Open a GDAX office in New York City, further investing in our ability to serve institutions and professional traders,” wrote Armstrong.
Leading cryptocurrency exchanges like Bitstamp and Coinbase support an active user base of millions of traders and investors. As the cryptocurrency market continues to proliferate in the next few years triggered by the entrance of institutional money and large-scale investment firms, the demand for trading platforms will increase further.
Cryptocurrency exchanges can no longer be considered as small to medium-sized companies serving a niche market. They have become properly regulated and operated financial institutions with millions of active users and billions in daily trading volume.