BIP75 was strongly resisted by Peter Todd, and Bitcoin's inclusion of KYC rules caused controversy

BIP75, the latest Bitcoin Improvement Proposal co-authored by developers from Netki and Breadwallet, has been boycotted by bitcoin core developer Peter Todd and Mastering Bitcoin author Andreas Antonopoulos over the inclusion of know-your-customer (KYC) and anti-money laundering (AML) rules in the proposal.

BIP75: ‘A Bad Bitcoin Strategy’?

This update, called BIP75, was originally intended to make Bitcoin transactions more compatible with the payment regulations of many countries.

However, adding rules that make it easy to identify the two parties in a transaction goes against the spirit of Bitcoin, and both Todd and Antonopoulos believe that this could be detrimental to Bitcoin.

“In any case, I think we should remove BIP75 from the repository of improved protocols and boycott wallets from adopting it,” Todd responded to Justin Newton of Netki.

He added: “This is a poor strategy for Bitcoin developers willing to engage in AML/KYC, and the small tactical wins are not worth it.”

On Twitter, Antonopoulos was more blunt, calling the update a “bad proposal for Bitcoin”:

“BIP 75 is actually a proposal to degrade Bitcoin. Promoting KYC on any layer will reduce the value of Bitcoin.”

The source of the controversy is that BIP75 allows the sender of a transaction to add optional identity information when making a transaction, which will increase the compliance of Bitcoin transactions.

To demonstrate the redundancy of this proposal, Todd used the Tor protocol as an analogy.

"In some (most?) countries, it is illegal to provide telecommunications services without wiretapping facilities," he wrote. "Does this mean that Tor is going to build wiretapping capabilities into its 'open source' and 'open standards' software? No."

Meanwhile, wallet providers such as Samourai have heeded Todd’s advice:

“It goes without saying that we will not be implementing BIP 75. We are opposed to any form of KYC/AML rules being built into wallets, as we believe this would set a dangerous precedent.”

Supportive voices

In response, Newton, the author of BIP, replied to Todd:

“We want to build tools that allow entrepreneurs to survive more easily and allow more people and companies to enter the ecosystem.”

“I don’t know if you’re against organizations that have anti-money laundering requirements using the bitcoin blockchain, and if you are, why wouldn’t you choose an open source, open solution instead of an exclusive, proprietary solution?”

“This is an opt-in protocol that some wallets have expressed support for and it has a valid use case. It doesn’t clutter the Bitcoin blockchain as it doesn’t actually store any additional data,” wrote Reddit user u/bitawareaustralia.

To view the full BIP75 improvement proposal description, visit the GitHub page, where the author summarizes it as follows:

“In short, we want to make Bitcoin more user-friendly while improving the privacy of transactions.”