The Never Ending War On Privacy Coins
Privacy is a basic human right, but governments and institutions do not think the same way and want control over every aspect of your life, especially when it comes to money. Privacy related cryptocurrencies like Monero have been under attack for years, but recently some exchanges have started to delist the privacy related coins.
2023 saw a string of exchange delistings like Huobi and OKX. Binance even announced in May that it would be delisting privacy related coins to fall inline with EU regulations, but walked that back a bit later on according to Blockworks. But what is the problem with privacy coins? Well, we are going to be diving in a bit further.
Why Regulators Hate Privacy Coins
The concept of financial privacy itself becomes a double-edged sword in the eyes of regulators. While individuals value the right to keep their financial transactions confidential, regulators argue that this very privacy feature can be exploited by bad actors. The lack of transparency raises red flags, as it contradicts the traditional financial system's emphasis on traceability and accountability, crucial elements in preventing and combating financial crimes.
Traditional financial systems require adherence to anti-money laundering (AML) and know your customer (KYC) regulations to curb illegal activities. Privacy cryptocurrencies, by design, make it difficult to comply with these regulatory standards. This creates a clash between the decentralized ethos of cryptocurrencies and the need for regulatory oversight, leading to a tense relationship between the two.
Regulators are also wary of the potential for privacy coins to hinder the fight against tax evasion. The anonymity provided by these cryptocurrencies could enable individuals to conceal their financial transactions from tax authorities, undermining the integrity of tax systems globally. This concern becomes more pronounced as governments strive to balance the adoption of innovative technologies with the need to safeguard their revenue streams and economic stability.
Why KYC and AML Are Bad For Privacy Coins
Let's dive into why Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, meant to beef up financial security, are raising eyebrows when it comes to individual privacy, especially in the realm of privacy coins.
First off, the big concern here is the serious dent in personal privacy. With KYC and AML rules, folks have to spill the beans on sensitive personal stuff when making financial moves. Critics argue that this mandatory info dump to financial institutions messes with our basic right to financial privacy. And let's face it, collecting all that personal data not only raises security red flags but also begs the question of how responsibly these institutions handle our info.
What's more, jumping on the KYC and AML bandwagon means creating mega-databases with all our juicy personal and financial details. It's like hanging a sign saying "Come and get it" for hackers, increasing the risk of identity theft and shady access. It's like playing with fire, considering how much we hear about data being the new oil and all that.
Another hitch is that KYC and AML laws hit some folks harder than others. These super strict ID rules can leave out those without traditional banking access, putting a damper on financial inclusion. Imagine trying to join the global economy party but getting stuck at the door because you don't have the right ID.
Then, there's the freedom factor. The privacy coin community say KYC and AML laws are like antithesis of financial freedom. They argue that we should be able to do our thing financially without Big Brother watching our every move. After all, being able to keep our financial doings on the down-low is a basic right, letting us have more control over our personal info and shielding us from potential misuse.
Why Delisting Privacy Coins Is A Good Thing
Centralized exchanges, often serving as the primary platforms for trading cryptocurrencies, have faced criticism for their susceptibility to market manipulation. Large traders, commonly referred to as whales, can exert significant influence on the prices of assets, including privacy coins. The opaque nature of these exchanges allows for practices like pump-and-dump schemes, wash trading, and other forms of market manipulation, all of which can distort the true value of a cryptocurrency.
Delisting privacy coins from centralized exchanges could potentially mitigate these issues and foster a more transparent and equitable market. By removing certain cryptocurrencies from the high-liquidity environment of centralized exchanges, the market becomes less susceptible to manipulation by a few influential entities. This, in turn, creates a level playing field for smaller investors and encourages fairer price discovery based on genuine market demand and supply dynamics.
Furthermore, decentralization enthusiasts argue that relying solely on centralized exchanges for price discovery contradicts the core principles of blockchain technology. Cryptocurrencies were conceptualized to provide financial autonomy, transparency, and security by eliminating the need for intermediaries. The concentration of trading on a few centralized platforms undermines these principles, as these exchanges often operate with their own set of rules and regulations, impacting the true decentralization of the crypto ecosystem.
Delisting privacy coins might also incentivize the development and growth of decentralized exchanges (DEXs). These platforms operate without a central authority and allow users to trade directly from their wallets, enhancing security and reducing the risk of market manipulation. The proliferation of DEXs could contribute to a more resilient and robust crypto market infrastructure, aligning with the ethos of decentralization that many cryptocurrency enthusiasts advocate for.
Decentralized Exchanges Are The Way
The privacy coin community stands at a crossroads, considering a shift towards decentralized exchanges (DEXs) and atomic swaps to reinforce its core principles. DEXs align more closely with the ethos of privacy coins by facilitating peer-to-peer transactions without a central authority, promoting user autonomy and reducing the risk of external surveillance. This move not only enhances security but also shields users from potential privacy infringements associated with centralized exchanges.
Centralized exchanges, known for their regulatory vulnerabilities leading to privacy coin delistings, have prompted a call for resilience within the privacy coin ecosystem. Embracing DEXs provides a decentralized alternative, lessening the community's dependence on centralized platforms and mitigating regulatory pressures. In doing so, privacy coins can maintain accessibility and foster a more resilient financial infrastructure that aligns with their commitment to decentralization.
The integration of atomic swaps which allows direct and trustless exchanges between different cryptocurrencies, emerges as a powerful tool for privacy coin users. By eliminating the need for intermediaries, atomic swaps enhance transaction privacy and contribute to the community's goal of creating a robust, secure, and privacy-focused financial environment. As the privacy coin landscape continues to evolve, prioritizing decentralized solutions becomes paramount for ensuring the longevity of financial autonomy and privacy.
In conclusion, the evolving landscape of privacy coins, with its emphasis on decentralized exchanges and atomic swaps, echoes a fundamental principle – the recognition of privacy as a basic human right. The privacy coin community's exploration of alternative avenues aligns with the belief that no external authority should dictate how individuals transact with each other... PERIOD
This post was written for and posted on Coin Logic, my cryptocurrency research platform.
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They could become pivotal in the next stage of crypto adoption, wherever that may lead.
Absolutely! I would rather take Monero for all payments if I could, haha.
Those coins may come out to be relevant in one way or the other maybe later in the years but not all of them
Monero is the true privacy champion, the rest have privacy as an option, but privacy coins will be absolutely relevant the way the world is going. I don’t want to be spied on with my transaction.
If we would use these damn DEXs and privacy coins more... On the contrary, it seems that crypto is getting more centralized when it comes to distribution and usage. We are all waiting for the damn ETFs to be approved because we know big money will enter the market but these ETFs will further centralize the Bitcoin ownership. The appetite for privacy coins is quite weak, I guess we can blame meme coins for that 😀.
Hey, my mission is to get people using things like Monero more and more. I added it as a form of payment on the Hivelist Store as well. But you are right. People bowed to the institutions and just want to pump their shitcoin bags. Shows that this industry is being overran by kids that don't know how things really work.
The industry is still very immature indeed.
The powers that be want to record every transaction and tax every little bit.