{"id":7218,"date":"2020-01-08T20:27:22","date_gmt":"2020-01-08T18:27:22","guid":{"rendered":"https:\/\/forklog.media\/?p=7218"},"modified":"2020-01-20T02:11:08","modified_gmt":"2020-01-20T00:11:08","slug":"will-monero-dash-zcash-and-other-private-coins-be-delisted","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/will-monero-dash-zcash-and-other-private-coins-be-delisted\/","title":{"rendered":"Will Monero, Dash, Zcash, And Other Private Coins Be Delisted?"},"content":{"rendered":"

Bitcoin and other cryptocurrencies draw more and more attention from regulators and politicians around the world. Governments openly pursue monitoring of transactions. They tend to restrict or ban digital currencies that make the monitoring job harder.<\/span><\/p>\n

<\/p>\n

The most well-known example is the <\/span>set of guidelines<\/span><\/a> for the cryptoindustry released by the FATF. According to the document, Bitcoin exchanges and other Virtual Asset Service Provides have to observe KYC, AML, and CFT procedures like traditional finance companies. However, the decentralized nature of cryptocurrencies gets in the way of observing the guidelines to the letter.\u00a0<\/span><\/p>\n

In Bitcoin and some other altcoins there are ways to implement at least some form of surveillance. But when it comes to so-called \u201c<\/span>anonymous cryptocurrencies<\/span><\/a>\u201d this isn\u2019t exactly the case.<\/span><\/p>\n

Several recent cases show that some trading platforms aren\u2019t going to bother and will simply delist problematic coins. On September 30th, a large Korean exchange Upbit <\/span>delisted<\/span><\/a> Monero (XMR), Dash (DASH), Zcash (ZEC), Haven (XHV), BitTube (TUBE), and PIVX. On October 10th, another Korean exchange OKEx <\/span>did the same<\/span><\/a>. In both cases the exchanges acted because of inability to observe FATF recommendations.<\/span><\/p>\n

This is an interesting precedent that may have a significant influence on anonymous cryptocurrencies. Some experts suggest that mass delistings may leave such coins in oblivion.\u00a0<\/span><\/p>\n

Is it that bad?<\/span><\/p>\n

Anonymous Cryptocurrency Ban In Japan<\/span><\/h2>\n

The first signs of troubles anonymous cryptocurrencies were going to face emerged back in March, 2018. Japanese cryptoexchange Coincheck <\/span>delisted<\/span><\/a> Monero, Dash, and Zcash.<\/span><\/p>\n

At that time, FATF Guidelines weren\u2019t there yet, so the delisting has happened because of the changes in the national AML and CTF introduced by the Japanese Financial Services Agency. The changes are, in turn, tied to the notorious hacking scandal when Coincheck <\/span>lost<\/span><\/a> over $500 million in NEM.<\/span><\/p>\n

Soon it became apparent that Coincheck wasn\u2019t the only Japanese exchange to face the consequences of this event. By June, 2018, anonymous cryptocurrencies were <\/span>banned<\/span><\/a> across Japan. The regulator insisted that this decision will make the crypto industry safer and more transparent.<\/span><\/p>\n

The reasoning behind the ban boiled to the fact that anonymous cryptocurrencies are being used for money laundering and other illegal activities, while making it impossible to track down the owner of a particular coin.<\/span><\/p>\n

Japanese regulators were especially interested in Monero. This is presumably related to the <\/span>reports<\/span><\/a> that North Korea sees this cryptocurrency as a way to bypass sanctions. At that time there was a significant chance that North Korean hackers may have to do with Coincheck hack.<\/span><\/p>\n

Jumping On the Bandwagon<\/strong><\/span><\/h2>\n

Japan isn\u2019t the only country where anonymous cryptocurrencies are officially banned. The country was the first to legalize cryptocurrencies and define the legal framework for exchanges. Unsurprisingly, other countries tend to keep an eye on its decisions.\u00a0<\/span><\/p>\n

Back in June 2018, the US Congress <\/span>proposed<\/span><\/a> to implement additional measures to react to the rise of private coins.<\/span><\/p>\n

Within this initiative, the deputy assistant director in the U.S. Secret Service\u2019s Office of Investigations Robert Novy asked to extend the authority of the law enforcement to let them confiscate \u201cdigital evidence\u201d from private companies, even if the latter refuse to disclose users\u2019 data.<\/span><\/p>\n

The US approach to political decisions doesn\u2019t allow for a proposal like this to be approved yet. But this doesn\u2019t mean that the secret services have lost their interest. Just at the end of last year, the US Department of Homeland Security <\/span>revealed<\/span><\/a> its plans to look for ways of analyzing transactions made with private coins.<\/span><\/p>\n

The Japanese example inspired France more than others. In March, 2019, the president of the local National Assembly Erik Woerth <\/span>proposed<\/span><\/a> to forbid anonymous cryptocurrencies. He used the typical reasoning: anonymous coins can be used for illegal activities.<\/span><\/p>\n

What Do Developers Of Anonymous Cryptocurrencies Say<\/span><\/h2>\n

Representatives of anonymous cryptocurrency projects usually note that the exchanges acted hastily and the reported anonymity of such currencies won\u2019t get in the way of transaction monitoring.<\/span><\/p>\n

\u201cDash is identical to Bitcoin and is 100% capable of meeting the requirements. At times, this requires some education as to why there are no legally definable differences between a Dash and Bitcoin transaction,\u201d<\/i><\/strong> Ryan Taylor, chief executive officer at Dash Core Group Inc. <\/span>told<\/span><\/a> Bloomberg.<\/span><\/em><\/p><\/blockquote>\n

Dash uses PrivateSend mechanism based on CoinJoin technology. The mechanism obscures the link between the sender and the recipient. However, Taylor noted that Dash partnered with analytical companies BlockchainIntel and Coinfirm that cooperate with law enforcement and are capable of providing the necessary information.<\/span><\/p>\n

Electric Coin, the company behind Zcash, also insisted that their cryptocurrency can fit the FATF guidelines if necessary. In his <\/span>article<\/span><\/a> Jack Gavigan, the Director of Product and Regulatory Relations at Electric Coin, argues that Zcash fits the guidelines more than any other virtual asset.<\/span><\/p>\n

\u201cUnder the FATF recommendations, VASPs are required to undertake CDD measures when establishing a business relationship. The fact that a VASP supports Zcash or that a customer intends to trade Zcash does not impact the VASP\u2019s ability to carry out CDD checks. In this respect, Zcash is no different from other virtual currencies such as Bitcoin or Ethereum, and VASPs can apply the same CDD processes,\u201d<\/strong> Gavin wrote in the article.<\/span><\/em><\/p><\/blockquote>\n

He noted that in a Zcash transaction it is possible to include the information about the sender and the receiver. Additionally, service providers can monitor deposits and withdrawals, as well as compare patterns and volumes of transactions with the expected behavior. Gavigan has also provided screenshots to show how the information can be put into a transaction:<\/span><\/p>\n

<\/p>\n

Monero\u2019s situation with the regulators is a lot more complicated, as <\/span>it took anonymity seriously<\/span><\/a>. The protocol doesn\u2019t allow you to tie any of the parties to a particular person. It uses circular signatures and built-in coin fungibility to hide transaction sums. It even has stealth-addresses.<\/span><\/p>\n

Monero developers note that there is a function called <\/span>View Key<\/span><\/a> that allows monitoring incoming transactions for a particular address. However, it isn\u2019t sufficient for full-fledged surveillance.<\/span><\/p>\n

Will Anonymous Cryptocurrencies Face Mass Delisting?<\/span><\/h2>\n

Nobody knows for sure, but some experts believe this might be the case.\u00a0<\/span><\/p>\n

Earlier this year, an analytical company Chainalysis published an <\/span>open letter<\/span><\/a> to FATF urging the regulator not to stricten the rules for the crypto industry too much. The authors of the letter emphasized that the existing exchange infrastructure doesn\u2019t allow to identify the recipient every time. There is also no way to find out if the recipient uses a personal wallet or a VASP.<\/span><\/p>\n

It gets worse, considering that for exchanges it is still easier to delist private coins, than to invest money and effort into observing FATF recommendations.<\/span><\/p>\n

\u201cThere is a good chance many will be delisted and liquidity will dry up,\u201d<\/strong> Jeff Dorman, chief investment officer at Arca <\/span>said<\/span><\/a> to Bloomberg.<\/span><\/em><\/p><\/blockquote>\n

Meanwhile, some exchanges didn\u2019t go the easy way. In September 2019, Binance, the leading cryptoexchange by trading volume, added Monero, Zcash, and Dash to its new service called Binance Lending. In his Twitter Binance CEO Changpeng Zhao commented:<\/span><\/p>\n

\u201cDo you think privacy is a fundamental right?\u201d<\/i><\/strong><\/p><\/blockquote>\n

\n

Do you think privacy is a fundamental right? https:\/\/t.co\/TZaVT5Uis4<\/a><\/p>\n

— CZ \ud83d\udd36 BNB (@cz_binance) September 17, 2019<\/a><\/p><\/blockquote>\n