According to reports, the European Union is considering outlawing privacy coins like Monero (XMR), Zcash (ZEC), Secret (SCRT), and Dash (DASH).
According to an anonymous EU diplomat, EU legislators are drafting a proposal for anti-money laundering legislation that would forbid banks and crypto service providers from privacy coin issuers.
If implemented, several cryptocurrencies, such as Monero (XMR), Secret (SCRT), Zcash (ZEC), and Dash (DASH), would be essentially blocked.
In March, the European Parliament submitted legislation to restrict exchanges between exchanges and unhosted wallets. The parliament now appears ready to tighten regulations on anonymity in cryptocurrency.
The body stated, “Credit institutions, financial institutions, and crypto-asset service providers shall be prohibited from keeping…anonymity-enhancing coins.”
The 26 member nations have since received copies of the draft, which is thought to have been written by Czech government representatives. The privacy-busting proposal has been off the record.
Even on the dark web, Bitcoin remains the currency of choice, according to research by the RAND Corporation: https://t.co/ZJhKvFtGe4
Bottom line: There is no evidence that privacy-enabling features provide any advantage to criminals, or hinder the prevention of crime. pic.twitter.com/jU4iXDXuTU
— Jack Gavigan (@JackGavigan) November 15, 2022
Privacy At Risk?
Zcash CEO Josh Swihart provided a behind-the-scenes perspective on the difficulties and possibilities faced by the privacy coin sector. Public blockchains pose a significant security risk to both businesses and individual users, according to Swihart.
“If I’m a business accepting cryptocurrency natively, not through a third-party intermediary, I can’t afford to let my competitors see all of that [personal] information. Not only the information about my business—what’s coming in and out—but information about my customers who may be transacting with me online or using cryptocurrency. So I expect there to be a tipping point where there’ll be a flood of demand.”
Swihart predicts that as we now have all kinds of crypto surveillance companies, like Chainalysis and others, that are tracking transactions to look at flows and tag addresses, the demand for privacy coins will grow urgent.
Regulators and increasingly sophisticated on-chain surveillance may spur a rise in the demand for privacy coins. Ironically, regulators might support privacy coins instead of outlawing them.
That is a lesson that US regulators may find useful as well. One such instance is the recent blocklisting of Tornado Cash by the Office of Foreign Assets Control (OFAC) of the US Treasury Department.
According to Swihart, there is reasonable concern about regulatory discussions’ direction. He believed that what OFAC did was a significant overreach.