PRIVACY CRYPTOCURRENCY DELISTINGS HAVE BEGUN
It Was Inevitable That This Time Would Come
Often referred to as ‘privacy coins’, the future for anonymous cryptocurrencies looks increasingly uncertain as authorities ramp up anti-money laundering enforcement and pressure exchanges to drop coins like Monero, Zcash, and Dash.
At the time of writing, anonymous cryptocurrencies are legal in most countries. It’s unlikely this will remain the case, however, given the growing focus on the use of cryptocurrencies in money laundering and ransomware attacks. For example, both the US and Japanese authorities have explored legislation for banning Monero and ZEC. In Japan, the Financial Security Agency (FSA) has banned Dash, Monero and Zcash. While this doesn’t make those tokens illegal in Japan, it does make trading them very difficult for anyone using a Japanese based exchange as the FSA is the government body that oversees crypto exchanges in Japan.
Exchanges delisting privacy coins
It’s likely that as more centralized exchanges attempt to go legit, they will drop anonymous coins – given the negative attention they attract from the authorities. The delisting trend got underway in 2019 when OKEx Korea and Upbit both stopped trading privacy coins and Bitbay dropped Monero in November that year. Then Monero was delisted by Huobi Korea in April 2020 and Monero pairs were dropped by Bithumb last June.
In 2021 the pace is picking up. Seattle based Bittrex announced on December 30th 2020 that it will be delisting privacy coins Monero (XMR), Zcash (ZEC) and Dash (DASH). Users of Bittrex must perform any trades associated with these coins no later than January 15th 2021.
News of the delistings arrived via a blog post from the company. No specific reasons were provided for the delistings but following the initial post shared by Bittrex, the exchange also reshared its Market & Token Removal Policy. The exchange’s policy explains “There are circumstances where Bittrex may decide to remove a token from the Bittrex Exchange. Bittrex reserves the right to remove any token or market from its Exchange for any reason and without prior notice.”
Bittrex follows another US exchange, Shapeshift, in taking the drastic decision to delist all three privacy coins. Shapeshift made its move in November 2020 and said it made the decision to “de-risk the company from a regulatory standpoint,” but did suggest they may revisit the situation in the future.
The Shapeshift and Bittrex delistings are at least in part a response to a string of new regulatory proposals in the US that could ultimately affect the legality of privacy coins there. In late December 2020 the US Financial Crimes Enforcement Network (FinCEN) released a regulatory proposal that would place identification requirements and value restrictions for transitions involving self-hosted crypto wallets.
FinCen wants banks, crypto exchanges and other money service businesses (MSBs) to collect identifying data about any person who wants to transfer USD3000 from an “unhosted” wallet. An unhosted wallet is described by crypto advocacy group Coin Center as “software applications that allow users to conduct pseudonymous, personal transactions in crypto assets over the internet without the use of a financial intermediary.”
This rule means extending the Know-Your-Customer (KYC) and Anti-Money Laundering rules associated with exchange hosted wallets to persons in the US who want to redeem fiat for crypto or move “Convertible Virtual Currencies’ (CVCs) into cold wallets.
FinCen says that “significant national security imperatives” are behind the decision and that U.S. authorities have found that malign actors are “increasingly using CVC to facilitate international terrorist financing, weapons proliferation, sanctions evasion, and transnational money laundering, as well as to buy and sell controlled substances, stolen and fraudulent identification documents and access devices, counterfeit goods, malware and other computer hacking tools, firearms, and toxic chemicals.”
In a blog post, blockchain analytics and forensics firm Ciphertrace note that the new rules would mean that banks and MSBs will “not complete the transmission of funds until such recordkeeping and verification is complete.” This is why privacy coins, more so than other cryptocurrencies, will fall under the scope of the proposed new regulations, as they use anonymizing technology like zero-knowledge proofs and ring signatures to obscure crypto transaction information concerning the identity of transferors and recipients.
Within the full Notice of Proposed Rulemaking (NPRM) FinCen cite specific privacy coins or Anonymity Enhanced Currencies (AECs) as potentially problematic under the proposed law stating several types of AEC – for example, Monero, Zcash, Dash, Komodo, and Beam – are “increasing in popularity and employ various technologies that inhibit investigators’ ability both to identify transaction activity using blockchain data and to attribute this activity to illicit activity conducted by natural persons.”
The NPRM also notes. “Though relatively small in comparison to more established CVC networks, AECs have a well-documented connection to illicit activity. For example, AECs were used to launder Bitcoins paid to the wallet used in the Wannacry ransomware attack. AECs are accepted on various darknet marketplaces and the largest cryptocurrency mining malware networks continue to mine Monero, a type of AEC.”
With privacy coins now under the microscope of US regulators and exchanges like Bittrex choosing to take a safety first approach by delisting potentially troublesome coins, some projects have stood their ground. One of the privacy coins delisted by Bittrex, Dash (DASH), announced that they had reached out to the compliance team at Bittrex and explained. “From a technical standpoint, Dash’s privacy functionality is no greater than Bitcoin’s, making the label of “privacy coin” a misnomer for Dash”. While DASH has often been labeled as a privacy coin alongside XMR and ZEC, only a small percentage of transactions on the Dash blockchain use the Privatesend Coin mixing service that is a feature of the network. On January 5th there were 28977 on the network and only 153 used Privatesend (~0.5%).
Tyler Winklevoss the founder of another major US exchange Gemini tweeted out in support of privacy coin ZEC following its delisting from Bittrex. On January 2nd he said “Zcash $ZEC is easily the most underrated crypto right now. It brings privacy to money, which is a fundamental building block of a free and open society. Proud that @Gemini supports this noble project with @NYDFS approval.” Additionally highlighting that Zcash has been approved to trade on the exchange with approval from the New York Department of Financial Services (NYDFS).
Crypto’s top 5 privacy coins by market cap
Because Bitcoin uses a public key to secure transactions, it is perceived as private because the key isn’t linked to any identifiable information. While it’s not easy to identify an individual using bitcoin — it isn’t strictly anonymous — rather, it’s a pseudonymous cryptocurrency. Theoretically, information about a person using bitcoin can be gleaned over an extended period of time, with companies like Chainalysis and CipherBlade specializing in this type of work.
For those who want a truly anonymous cryptocurrency, there are a few options – and some of them like Dash, Monero and Zcash are already household names. To answer the question of what is the best privacy coin you need to consider what you want to use them for, their level of privacy – default or optional – and their trading liquidity. Liquidity, in particular, will become more important as the number of exchanges delisting privacy coins is increasing. Below, we present some key data about crypto’s most popular privacy coins and info on where you can currently trade them.
1. Monero (XMR)
|Market Cap: 2B | | Average Daily Volume: 500M+ |
Launched in 2014, Monero is the number 1 privacy coin by market cap and permits private, untraceable, analysis resistant and unlinkable transactions. Monero is a privacy coin by default (with some other coins, private transactions are an optional setting). XMR’s privacy is powered by ring confidential transactions (RCT), Multilayered Linkable Spontaneous Anonymous Group signatures (MLSAG), in addition to stealth addresses. The XMR network functions on decentralized distributed consensus technology, offering no centralized place of attack in the event of a breach. Unlike other popular cryptocurrencies, your Monero funds are not associated with your public address. So, if you share your public address with someone, they will not know how much money you have.
Where to buy Monero
|Market Cap: 1.1B | | Average Daily Volume: 500M+ |
Created in 2014 and known as XCoin, the token relaunched as DASH – which stands for ‘digital cash’ – in 2015. DASH is not anonymous by default, instead users have to opt to make a transaction anonymous. DASH’s PrivateSend feature provides users with financial privacy by obscuring the origins of all funds. DASH does this through a mixing protocol utilizing an innovative decentralized network of servers called masternodes. The DASH in your digital wallet consists of disparate “inputs” that serve as separate, discreet coins. DASH breaks these transaction inputs down into standard denominations and mixes them with the inputs of two other people without your coins ever leaving your wallet. The DASH network offers instantly confirmed, double-send proof transactions.
Where to buy Dash
3. Zcash (ZEC)
|Market Cap: 650M | | Average Daily Volume: 300M+ |
First Launched in 2016, Zcash is a Bitcoin fork. Its privacy functionality is optional and achieved using zero knowledge succinct non-interactive arguments of knowledge – otherwise known as zk-SNARKs. Zcash users can choose to shield their transactions. ZEC addresses beginning with a “t” are transparent, and addresses that start with a “z” include privacy enhancements and are referred to as “shielded addresses.” Zcash uses Equihash as its Proof of Work algorithm. Equihash is ASIC miner resistant, which means the ZEC tokens can be mined at home.
Where to buy Zcash
|Market Cap: 25M | | Average Daily Volume: 300,000+ |
PIVX – which stands for Private Instant Verified Transaction, is a fork of the DASH blockchain. PIVX is open source with optional privacy features which it has branded ‘Shield’. Like many privacy coins, PIVX uses a customized version of zk-SNARKs. PIVX-shielded transactions are near instant – and data including the sender and receiver’s details and the value of the transaction are all invisible. PIVX operates a proof of stake consensus. Like all privacy coins with anonymity as a option, PIVX is designed to be used as a standard transactional crypto and has an active program to onboard merchants. In such a scenario, PIVX-transparent addresses would be used and they are publically viewable.
Where to buy PIVX
Exchanges where you can buy and trade PIVX include Binance, Bithumb, Bittrex, and Kucoin.
|Market Cap: 14M | | Average Daily Volume: 3M+ |
Grin (GRIN) is a default privacy coin launched in January 2019 which employs MimbleWimble to obscure transaction data. MimbleWimble allows GRIN to remove transaction data without compromising the security or stability of its blockchain. GRIN can be mined on a home PC.
Where to buy GRIN
Exchanges where you can buy and trade PIVX include Bittrex, HitBTC and Kucoin.
Why use a privacy coin?
While there is a common perception that the only use case for privacy coins is shady transactions, there are actually plenty of scenarios where law-abiding citizens might want to use anonymous cryptocurrencies. Here are some examples.
Although some people are happy to wear their political and social affiliations on their sleeves, there are just as many who prefer to keep such information to themselves. For example, if someone is pro-life and works in an environment where their employers and co-workers are pro-choice, they can make political contributions with these cryptocurrencies without anyone finding out.
Doing business discreetly
Privacy coins are the perfect solution for an entrepreneur or company that wants to send money to another company without their competitors seeing who they’re doing business with.
Prevention of government interference
It’s not hard to imagine a world in which government organizations come after all crypto creators, forcing them to implement anti-privacy and de-anonymization features. We’ve already seen the attempts that world governments have begun to make where regulation is concerned. That being said, if the Monero – AlphaBay situation has taught us anything it’s that anonymous cryptos can seriously stump government agencies and prevent them from invading your privacy at will — shielding us from the unwanted attention of tyrants or bad actors.
Securing your devices with privacy coins
When friends ask me for my advice about investing, I always tell them that their number one consideration should be purchasing a Virtual Private Network (VPN) with military-grade encryption. This ensures that no one can track your altcoin purchases or gain access to your wallet.
The most private VPNs are logless, meaning that they do not keep logs of user activity or collect any of your personal information. Using reliable web hosting and a dedicated VPN solution can give traders that extra layer of security they need. The Seychelles-based VPN BolehVPN allows its customers to pay for VPN service with Monero.
PRIVACY CRYPTOCURRENCY DELISTINGS HAVE BEGUN
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