Tightened regulations, especially in relation to money laundering and terrorist financing, may continue to threaten permitted trading platforms for privacy-oriented cryptocurrencies.
Binance recently announced that it has placed three leading privacy-focused coins on its monitoring list due to volatility and regulatory concerns. The list includes Monero (XMR), Zcash (ZEC), and Firo (FIRO), alongside seven other coins tagged for monitoring, review, and possible delisting.
Binance states that these coins now have a “monitoring tag” and must pass evaluations on risks every 90 days to be tradeable. The review is part of periodic checks that crypto projects must undergo to continue meeting criteria around team commitment, trading volume, on-chain security, and liquidity.
The crypto exchange warns that if any of the tokens under monitoring fail to meet listing requirements, they will eventually be delisted. This development follows a similar move from a competing exchange, OKX, which recently delisted Monero and other privacy coins. In September 2023, Huobi also delisted several privacy coins, including Verge (XVG), Decred (DCR), and Dash (DASH).
What Are Privacy Coins and Why the Concerns?
Privacy coins like Monero and Zcash use advanced cryptographic techniques to hide transaction details and participant identities. The aim is to enable private, untraceable payments and savings.
For example, Monero obscures account balances and shuffles approaches to break transactions into smaller, unattributable parts. Zcash leverages novel “zero-knowledge proofs” allowing transactions without revealing underlying information.
However, the inherent anonymity has raised regulatory worries these tools enable illegal activities like money laundering and ransomware. A report from Chainalysis reveals that privacy coins are popular on darknet marketplaces.
The recent pressure contrasts with advocacy from privacy coin creators around enabling individual financial sovereignty and human rights. However, delistings by major exchanges would significantly impact accessibility.
Monero, launched in 2014, uses features like stealth addresses, ring signatures, and ring confidential transactions (RingCT) to ensure opacity on blockchain activity. Zcash began in 2016 and advocated for shielded private or transparent public transactions. It employs zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) proofs with faster throughputs and lower fees than Bitcoin.
Both networks have seen extensive global exchange listings and usage. However, tightened regulations, especially in relation to money laundering and terrorist financing, may continue threatening permitted trading platforms, such as those in the aforementioned centralized exchanges.
The coins listed under the new monitoring tag from Binance include Aragon (ANT), Keep3rV1 (KP3R), Mdex (MDX), MobileCoin (MOB), Reef (REEF), Vai (VAI), and Horizen (ZEN).
Notably, Horizen no longer operates as a privacy coin, following its developer’s decision on June 2023 to deprecate the shielded pools for its mainchain. This move removes all the privacy features previously associated with Horizen at the consensus level (Horizen describes itself as a “Layer 0” blockchain).
The team behind Horizen cited concerns surrounding global regulatory scrutiny as one of the factors for its pivot. In May 2023, the European Banking Authority (EBA) published guidelines on regulatory frameworks for dealing with projects and coins that operate using mixers and tumblers, zero-knowledge proofs, and other privacy-enhancing techniques.
Following Binance’s announcement, FIRO experienced a decline of -21.3% in its price over the 48 hours since, with the coin now trading at $1.51. XMR, meanwhile, was up +5.3% for the initial 24 hours since the announcement, then down -3.1% 24 hours afterward. ZEC is also down -6.9% over the same period, according to aggregated data from CoinGecko.
As a sector, privacy coins are down – 4.5% in the past 24 hours and down -11.6% over the past week.
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