Privacy Coins Test Crypto Exchanges for Comfort with Compliance

The crypto industry cypherpunkian Courage will be tested as governments and regulators use privacy tools to eventually allow criminals to do bad things – in addition to normal people doing mundane things.

Driving the news: Seven tokens are ready to be written off on Sept. 19 of the Huobi Global Top 10 Exchange, which on Monday sent shivers down the spine of the industry citing compliance with the “latest financial regulations” as a valid reason.

  • Token issuers who spoke with Axios expressed disappointment. One of them said he would fight the decision.
  • FTX, Binance, Kraken, OKX and Coinbase exchanges, as well as Huobi Global, declined to comment.

Why is this important: The “do it yourself” and “don’t ask permission” philosophy is a feature of the crypto industry, not a bug.

  • Yet the question of whether tools like Tornado Cash can help bad actors evade government sanctions is rocking the crypto industry on its own, whether or not it leaves customers embarrassed.

Between the lines: Huobi’s problem centers around Monero, Zcash, Dash, Firo, Decred, Verge, and Horizen, which collectively have a market capitalization of $5.5 billion.

  • Some tout the privacy features of their tokens more than others, so we’ll avoid calling them “privacy coins.” We’ll call them the “Lucky Seven”.
  • Monero’s XMR is the largest of these with a market capitalization of $2.5 billion, and it – along with the others named – has privacy-enhancing features to hide the identity of parties in a transaction.

What is happening“I spoke with Huobi before they delisted Monero and other assets, and they indicated that South Korea pressured them to delist these assets worldwide” , Justin Ehrenhofer of Monero-focused crypto wallet software company Cake Wallet told Axios.

  • “It speaks to Huobi’s dependence on South Korea.”

Backtrack: Kraken Reminder removed Monero’s privacy coin in the UK late last year.

  • “Unfortunately, we have to choose our battles and pay attention to broader business in the country,” Kraken chief Jesse Powell said at the time in response to bothered customers in a Reddit thread.
  • These fuzzy regional regulatory guidelines seem to be lost on crypto customers, with a ask on Reddit last year: “Can someone tell a simpleton why Monero and others are not tradable on Coinbase?”

What they say“Privacy is a basic requirement for any currency to be useful, so it’s unfortunate that some exchanges see this as problematic,” Jonathan Zeppettini, head of international operations at Decred, said in an email replying to Axios. . “Especially when all of these exchanges, by their nature, require users to provide personal information in order to trade.”

  • “The bigger exchanges such as Binance, Coinbase and FTX have been more forward thinking and probably appreciate that the future of cryptocurrency includes strong privacy safeguards,” he added.

Dash is “identical to bitcoin” in that transactions and addresses are publicly visible on the blockchain,” Ernesto Contreras, global head of marketing and business development at Dash Core Group, told Axios.

  • “We are reaching out to Huobi and regulators, and hope to clear up this misunderstanding soon, as we have done in the past with exchanges that had this position,” he says.

What others say: “It’s very possible that exchanges feel pressured to remove privacy technologies. And we’re certainly watching what they’re doing,” Galaxy Digital’s Alex Thorn told Axios.

State of play: The US Treasury this week issued guidelines on Ethereum’s biggest privacy tool, Tornado Cash, clearly explaining how users can withdraw funds, legally.

  • Meanwhile, FTX recently notified customers on interaction with the Aztec Privacy Protocol.
  • And Binance and Coinbaserespectively, have tried to explain their position on certain tokens, but do not directly address where in the world certain guidelines come from that would prevent them from listing them.

And after: Issuers of the Lucky Seven seem poised to deny that the main feature of their tokens is to allow secrecy in hopes of diverting attention and staying in the good graces of coin custodians.

Crystal’s thought bubble: Cypherpunkian principles are what separate the crypto team from Wall Street, without it they are just a Rube-Goldbergian version of the same financial machine. And these monetary interests are coming for the industry anyway.

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