This article comes fromcoindesk, original author: Benjamin Powers
Odaily Translator |
Odaily Translator |
On December 8, 2020, the Dutch cryptocurrency exchange LiteBit sent an email to all its users informing them that it will soon delist the privacy coin Firo (formerly known as Zcoin). According to the email notification, the main reason for LiteBit’s decision is because Firo is a privacy coin, and Dutch regulators believe that the risks of cryptocurrencies “for privacy protection purposes” are too high.
Currently, LiteBit has confirmed that Zcoin will be officially delisted on December 22.
In fact, many cryptocurrency exchanges have recently been delisting privacy coins, and it seems unlikely that this trend will stop anytime soon, such as:
- Cryptocurrency exchange Shapeshift delisted Monero, Zcash and Dash months ago;
- Korean cryptocurrency exchange Bithumb also delisted Monero in June 2020.
"For our project, it is mainly limited to small-scale or regional cryptocurrency exchanges at present, but the delisted tokens actually send a signal to the outside world, indicating that the delisted tokens are now encrypted currency exchanges complying with AML. /KYC (Know Your Customer/Anti-Money Laundering) is the only way, and this is not the case, and LiteBit’s delisting of Firo actually sets a bad precedent.”
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It has become a global trend to delist privacy coins from cryptocurrency exchanges?
Reuben Yap believes that the removal of privacy coins from cryptocurrency exchanges has become a global trend, such as:
-In Asian countries such as South Korea and Japan, the regulatory measures for privacy coins are very strict;
- In Europe, it seems more open to privacy coins as there are already privacy regulations such as the General Data Protection Regulation (GDPR), but the French Finance Council has recommended that privacy coins be banned, and the Netherlands recently implemented new anti-money laundering regulations Regulations, which stipulate that the identity information of all parties involved in cryptocurrency transactions must be known, which obviously has a huge impact on privacy coins, and almost all domestic cryptocurrency exchanges in the Netherlands have delisted Monero;
- In Australia, due to pressure from the regulatory framework and the banking industry, cryptocurrency exchanges are also gradually delisting privacy coins. It is reported that the blockchain analysis company Chainalysis has played a large role in regulatory decisions on privacy coins in Australia and other countries.
- In the U.S., the Secret Service has urged the U.S. Congress to create ways and means to limit the use of privacy-focused cryptocurrencies as soon as possible.
Privacy coin Monero contributor Justin Ehrenhofer said:
According to Justin Ehrenhofer, in most cases, banks, exchanges, and other entities will find it easier and more convenient to simply write off products related to a specific token, rather than expending resources and effort to actually create a detailed compliance program.
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Why Are Cryptocurrency Exchanges Delisting Privacy Coins?
The core reason behind the withdrawal of privacy coins from cryptocurrency exchanges is mainly because of the privacy function, but for many cryptocurrency users, the privacy function is actually very important. The original intention of Bitcoin was privacy, and it supports Bitcoin. Cypherpunks themselves do not want to establish contact with the traditional financial system, let alone receive surveillance and scrutiny from regulators.
But regulators argue that privacy features are in conflict with know-your-customer/anti-money-laundering regulations.
Firo Project Lead Reuben Yap continued:
“The official reason given by regulators in many countries is that imposing a ban on privacy coins and delisting them from cryptocurrency exchanges will help combat money laundering and illegal use of cryptocurrencies. However, this looks more like An outer wall was built."
Reuben Yap believes that the reason why Japanese regulators want to "crack down" privacy coins is largely related to the fact that the cryptocurrency exchange Coincheck was hacked and a large amount of NEM was stolen, but NEM does not actually have any privacy features . The hacking of Coincheck was due to the exchange’s weak security, not privacy coins, which were not used for money laundering.
Reuben Yap added:
“In many cases, privacy coins seem to end up being the scapegoat.”
Australian exchanges like Swyftx clearly disagree with regulators banning privacy coins, but the reasons behind privacy coins should not be banned have not been widely disseminated. In South Korea, cryptocurrency exchanges claim to delist privacy coins to comply with Financial Action Task Force (FATF) regulations, but the problem is that privacy coin regulation has nothing to do with FATF.
Of course, Reuben Yap is not fighting alone. The US law firm Perkins Coie previously released a report detailing how privacy coins comply with existing anti-money laundering regulations. The author of the report wrote:
“Is it possible for a regulated entity to support privacy coins while still complying with anti-money laundering regulations? We think the answer is yes.”
“Most jurisdictions have not actually imposed an overly strict ban on these privacy-preserving cryptocurrencies, but regulators may need to give more detailed anti-money laundering procedures before adapting to privacy coins.”
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What impact will the delisting of cryptocurrency exchanges have on privacy coins?It should be noted that being delisted by a cryptocurrency exchange will indeed cause many problems for privacy coins. This is actually a signal to other participants in the cryptocurrency ecosystem, namely:Even if there are no compliance issues, the exchange can actually directly delist cryptocurrencies
— This obviously has far-reaching consequences.
However, cryptocurrency exchanges themselves can also be "delisted", and likewise will be "delisted" without violating any laws, probably because they will continue to be subject to soft attacks from regulators and their banking partners. pressure.
Reuben Yap revealed that the reason why Coinbase UK will delist Zcash is because its banking partner ClearBank is very worried about this privacy coin. This is a very typical example, because if other banks follow suit, it will undoubtedly bring a lot of question.
In addition, Justin Ehrenhofer also said that for small-scale encrypted assets such as privacy coins, delisting from cryptocurrency exchanges will seriously affect the viability of these encrypted assets, resulting in a significant reduction in the liquidity of these privacy coins, or even A drop below "life or death" levels is possible. On the other hand, for established privacy coins like Monero, such privacy coins simply push users to "trade in higher risk, less compliant jurisdictions".
Justin Ehrenhofer says:
“Generally speaking, privacy coin information can actually be viewed within the scope of regulators and compliant crypto exchanges, but if these exchanges delist privacy coins, they may be transferred to some poorly regulated cryptocurrency exchanges in other jurisdictions. The result is not conducive to regulatory investigations.”
It is worth mentioning that the privacy coins that have been delisted from cryptocurrency exchanges also include Dash (Dash), which was originally considered to be "Darkcoin". This cryptocurrency is actually a fork of Bitcoin. The privacy-focused features were dropped years ago in favor of other use cases for cryptocurrencies.
Glenn Austin, chief financial officer of Dash Core Group, speculated in a statement that the reason why some cryptocurrency exchanges have delisted Dash coins recently is likely to be reminiscent of the past "Darkcoin", which has also caused a lot of misunderstandings, but in fact, according to many Well-known cryptocurrency industry experts have concluded that Dashcoin is nothing more than a fork of Bitcoin and has long since ceased to be a privacy coin.
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looking to the future
looking to the future
Reuben Yap explained:
"For some privacy coin projects, the best approach may be to come up with high-quality opinions and solutions to prove that what cryptocurrency exchanges really need to solve is KYC/AML rather than thinking about how Remove privacy coins from the shelves.”
Reuben Yap believes that on-chain analysis is the only way to solve KYC/AML problems, while for Justin Ehrenhofer, the cryptocurrency community that wants to protect privacy coins should work more with compliance professionals to ensure They are satisfied with the compliance programs presented to banks and regulators. Of course, privacy coins themselves also need to focus on their own development, because if the survival of cryptocurrency exchanges does not depend on privacy coins, then they are unlikely to devote too much resources and energy to support and know your customer / anti money laundering compliance requirements Conflicting privacy coins, the result will be directly removed from the shelves.
Justin Ehrenhofer recommends ComplyFirst, a company that created a resource to help cryptocurrency exchanges explain to regulators how to support private cryptoassets in a compliant manner. Finally, Reuben Yap concluded:
