Cryptocurrency exchange ShapeShift’s controversial decision to require user identities wasn’t forced upon it but signified a “proactive” step to reduce legal risks, according to CEO and founder Erik Voorhees.

In comments to CoinDesk made over the weekend, Voorhees offered some hitherto unshared rationale behind a move that prompted criticism from some in the cryptocurrency community who’d seen the site’s prior policy of not requiring formally identified accounts as a way to protect privacy.

Some had speculated that ShapeShift’s new, soon-to-be mandatory “membership” model – announced in early September – was the result of direct or indirect threats from regulators. (This speculation may have been fueled in part by Voorhees’ own tweet in which he described the new customer ID system as “something we’re building under duress.”)

But Voorhees, a vocal libertarian advocate of privacy rights and a critic of know-your-customer (KYC) regulations, told CoinDesk that “KYC was not added as a result of any enforcement action, but rather as a proactive step we took to de-risk the company amid uncertain and changing global regulations.”

He added:

“It was a strategic decision as we believe the risk of not doing so had gotten too great. It was not made lightly.”

Voorhees said the firm had spent “months of legal work and over a million dollars of legal expenses on this topic alone. That is money and time that would’ve been better spent building things to protect and serve customers.”

While his comments confirm that regulatory considerations were a driving factor in the decision to make account identities mandatory, Voorhees framed it as a later addition to a program originally developed as an optional feature.

“KYC was thus stuck on to the Membership platform, and while optional membership and account-based features are certainly desired by many of our customers, there is nobody (including us) who desires forced KYC,” he said.

‘We remain committed’

In a Twitter exchange that occurred after Voorhees published a blog post a few weeks ago detailing the “tokenized” membership model as a way to provide special perks for loyal users, critics said he should have just shut the company down rather than compromise his pro-privacy principles.

But in his statement to CoinDesk, the ShapeShift CEO reiterated that he made the change with the utmost reluctance as a steadfast opponent of government surveillance in monetary affairs.

“We remain committed to the struggle for financial privacy and sovereignty for all humans, and will continue to be tactical about how we further that cause,” he said.

“The status quo is to invade the privacy of millions of innocent people in order to potentially decrease the risk of a few bad actors. We think this is both unjust and ineffective,” Voorhees went on to say, citing an estimate by the United Nations Office of Drugs and Crime that 2 percent to 5 percent of global GDP is laundered each year. “The current system is a failure by any measure.”

In a closing remark, however, Voorhees conceded:

“Ultimately, ShapeShift is a corporate entity, and we have to abide by laws around the world.”

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