In recent months, many cryptocurrency exchanges have delisted privacy coins: Shapeshift delisted Monero, Zcash, and Dash a few months ago; South Korean cryptocurrency exchange Bithumb delisted Monero in June of this year; currently almost all domestic cryptocurrency exchanges in the Netherlands have delisted Monero; LiteBit has also confirmed that zcoin will be officially delisted on December 22. It seems that this wave of delisting is getting stronger and stronger, and it seems difficult to stop.
From a global perspective, Asian countries such as South Korea and Japan have very strict regulatory measures on privacy coins; in the United States, the Secret Service has urged the US Congress to establish restrictions and measures for the use of privacy-centric cryptocurrencies as soon as possible. ; In Australia, due to the pressure of the regulatory framework and the banking industry, cryptocurrency exchanges are also gradually removing privacy coins. It is reported that the blockchain analysis company Chainalysis has played a large role in the regulatory decision-making of privacy coins in Australia and other countries. ; As Europe already has privacy regulations such as the General Data Protection Regulation, it seems to be more open to privacy coins, but the French Finance Commission has recommended banning the use of privacy coins, and the Netherlands has recently implemented new anti-money laundering regulations. It stipulates that it is necessary to know the identity information of all parties involved in cryptocurrency transactions, which obviously has a huge impact on privacy coins.
Why should cryptocurrency exchanges remove privacy coins?
In most cases, banks, exchanges, and other entities will find it easier and more convenient to directly cancel products related to specific tokens, rather than expending resources and effort to actually create detailed compliance plans. For small cryptocurrency exchanges that comply with compliance requirements, delisting privacy coins is the easiest way to respond to supervision. These cryptocurrency exchanges may not have the resources to correctly communicate their risk mitigation strategies to regulators and banks.
The Dutch cryptocurrency exchange LiteBit is a good example. Because the LiteBit project is small in scale and only a regional cryptocurrency exchange, the Dutch regulator believes that the risk of its issued privacy coin, firo, is too high, so in response to supervision , Delisting tokens is their only way to comply with AML/KYC (Know Your Customer/Anti-Money Laundering), and it is also the easiest way.
However, the core reason is that these cryptocurrency exchanges delisted privacy coins mainly due to privacy functions. The original intention of Bitcoin was privacy, and Bitcoin supporters themselves do not want to establish contact with the traditional financial system, let alone receive supervision and review by regulatory agencies. So for many cryptocurrency users, privacy features are actually very important, but regulators don’t think so. They feel that privacy features are in conflict with Know Your Customers/Anti-Money Laundering Regulations, and ban privacy coins and make them Delisting from cryptocurrency exchanges will help combat money laundering and illegal use of cryptocurrencies.
Through careful analysis of global crypto exchanges’ delisting of privacy coins, we were also surprised to find that things are not as simple as imagined. In many cases, privacy coins seem to have become scapegoats. For example, in South Korea, cryptocurrency exchanges claimed to remove privacy coins in order to comply with the regulations of the Financial Action Task Force (FATF), but the problem is that privacy currency supervision has nothing to do with the Financial Action Task Force; the reason why Japanese regulators want to ” The crackdown on privacy coins is largely related to the fact that Coincheck, a cryptocurrency exchange, was hacked to steal a large amount of New Economic Coins (NEM), but NEM actually does not have any privacy features. The hacker invaded Coincheck because of the exchange’s The security is weaker and not due to privacy coins, and privacy coins are not used for money laundering; and Australian exchanges like Swyftx obviously disagree that privacy coins are banned by regulators, but the reasons behind privacy coins should not be banned yet Be widely spread.
In addition, the privacy coin Dash, which was recently delisted on cryptocurrency exchanges, was originally considered to be “Darkcoin”. In fact, this cryptocurrency is a fork of Bitcoin. No longer focusing on privacy functions, but focusing on other use cases of cryptocurrencies, so Dash coins are not privacy coins for a long time, and this delisting may have caused a lot of misunderstandings.
After all, this actually sends a signal to other participants in the cryptocurrency ecosystem: Even if there are no compliance issues, exchanges can actually delist cryptocurrencies directly, which obviously has far-reaching implications. And it is worth noting that cryptocurrency exchanges themselves may also be “delisted” without violating any laws, because they will continue to be under soft pressure from regulators and their banking partners.
Coinbase UK is a typical example. The reason why they will delist Zcash is because their banking partner ClearBank is very worried about this privacy coin. But if other banks follow suit, it will undoubtedly cause many problems. For small-scale crypto assets such as privacy coins, delisting from cryptocurrency exchanges will seriously affect the viability of these crypto assets, resulting in a significant reduction in the liquidity of these privacy coins, and may even drop to the point of “life or death”. “s level. Other established privacy coins only encourage users to “transaction in jurisdictions with higher risks and lower compliance.”
Is it possible for cryptocurrency transactions to support privacy coins while complying with anti-money laundering/know your customer regulations?
Indeed, when under pressure from regulators and banks, the delisting of privacy coins on cryptocurrency exchanges is an easy way, because delisting privacy coins as soon as possible can indeed reduce risks, but most jurisdictions do not actually protect these Privacy cryptocurrencies impose too strict bans, and before adapting to privacy coins, regulators may need to give more detailed anti-money laundering procedures. On the other hand, privacy currency information can actually be viewed within the scope of regulatory agencies and compliant crypto exchanges, but if these exchanges delist privacy coins, they may be transferred to some poorly regulated cryptocurrencies in other jurisdictions. In the exchange, the result is not conducive to regulatory investigations.
So for cryptocurrency exchanges, is it possible to support privacy coins while complying with anti-money laundering regulations? The answer is yes.
At this stage, on-chain analysis is a way to solve the problem of knowing your customers/anti-money laundering. The cryptocurrency community that wants to protect privacy coins should cooperate more with compliance professionals to ensure that they are The organization’s compliance plan is satisfied.
There is currently a company that creates resources to assist cryptocurrency exchanges in explaining to regulators how to support private crypto assets in a compliant manner-ComplyFirst. So, for the privacy coin project, the best way may be to put forward high-quality opinions and solutions to prove that what the cryptocurrency exchange really needs to solve is to understand your customers/anti-money laundering issues, rather than thinking about how Remove privacy coins.
In fact, as Bitcoin and Ethereum blockchains begin to develop more and more privacy features, cryptocurrency exchanges will have to work hard to build the necessary compliance procedures, otherwise in the end they will not be removed from the shelves as they are now. A privacy coin is that simple. Before the cryptocurrency exchange completes the necessary compliance process, we may still see some privacy coins will be removed by the cryptocurrency exchange. If these privacy coins want to continue to survive, then they need to be forced to delete their own Privacy features.
Although privacy coins will continue to face many difficulties and challenges in the process of promoting understanding of your customers/anti-money laundering compliance in cryptocurrency exchanges, as cryptocurrencies begin to become mainstream, it is believed that these privacy coins will eventually attract the attention of the community. Privacy technology in cryptocurrency will eventually become popular.
