Not Your Keys — Not Your Bitcoin: Bittrex freezes accounts until they have "Enhanced" verification

First they came for Mt. Gox, and I did not speak out—     Because I did not use Mt. Gox.Then they came for BTC-e, and I did not speak out—     Because I did not use BTC-e.Then they came for Coinbase, and I did not speak out—     Because I did not use Coinbase.Then they came for me—and there was no one left to speak for me.(Niemöller, Modified)​Theorem: There is no Bitcoin exchange where your Bitcoin is safe.Proof: We show (1) that no Bitcoin exchange can be both in set A and in set B, (2) that any Bitcoin exchange outside of set A is unsafe, and (3) that any Bitcoin exchange outside of set B is unsafe.1) Define set A as the set of Bitcoin exchanges that suck up to government regulation, copying each other's policy changes in hope avoiding government seizure. Define set B as the set of Bitcoin exchanges that honor the principle of not retroactively changing verification policy for existing users. A and B have a Ø intersection: any exchange in set B cannot also be in set A. This comes from the realization that some set A exchanges are always upgrading verification standards, like Gemini. Since they (i.e., any of them, since if one does it, the rest by definition follow) retroactively apply these policies, the set B exchange will not be able to follow suit without leaving set B (by retroactively changing verification policy for existing users).2) Crypto has left regulators unsure of what to do. These regulators look for "leaders" in self-regulation, like Gemini. When Gemini, or any other set A exchange, enacts a new regulation, the regulators will find those who do not follow to be in violation of KYC/AML. In cases like BTC-e and 1Broker, we can see that regulators will not hesitate to seize the domains of exchanges that do not follow suit. Thus, if you put Bitcoin in an exchange g outside set A, it is possible that a set A exchange will enact a new regulation that g does not copy (it doesn't have to because it isn't in set A), in which case it is possible that g will be sieged by governmental organizations for KYC/AML violation. Since g could be any Bitcoin exchange outside of A, all Bitcoin exchanges outside A are unsafe.3) Suppose that you are readily available to comply with all regulations in set R. You choose an arbitrary Bitcoin exchange x outside of set B with regulations Rx, where Rx is a subset of R. As times passes, verification technologies improve, regulations change, and old verification technologies become obsolete, it is inevitable that the exchange will enact a new verification regulation r*. Since x isn't in set B, there is no guarantee that the exchange won't retroactively hold you to r*. Also, there is no predicting whether r* will be an element of R, so it is possible that you will be unable to meet r* if it's retroactively applied to you and thus unable access your Bitcoin from exchange x. Since x could be any Bitcoin exchange outside of B, all Bitcoin exchanges outside set B are unsafe.​Not your Keys --> Not your Bitcoin. Q.E.D. via /r/Bitcoin http://bit.ly/2O4cyVy