New EU Proposal Calls Ban on Privacy Coins

Blockonomi

Regulatory chase after privacy-enhancing coins is imminent but their natural structure may challenge the efforts.

The European Union is considering severe restrictions on the use of privacy coins as part of the organization’s anti-money laundering efforts, media reported. The plans were leaked out from an anonymous EU diplomat upon revelation to CoinDesk.

More Regulations Are Coming

According to the source, the legislative deliberation has been processed, the EU lawmakers could consider banning banks and crypto service providers from using the Internet.

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If passed, privacy-focused coins including Monero (XMR), Zcash (ZEC), Secret (SCRT), and Dash (DASH) will most likely get hit.

In April, the EU legislators voted in favor of controversial measures to ban anonymous cryptocurrency transactions, a move the industry says would stifle innovation and also drive away investors. The parliament seems to make those coins outlawed under stricter regulations.

“Credit institutions, financial institutions, and crypto-asset service providers shall be prohibited from keeping…anonymity-enhancing coins,” according to November’s bill initially reported by CoinDesk.

The European Parliament has held a neutral stance toward virtual currencies.

While the organization doesn’t encourage the use of cryptocurrencies, it sees the potential benefits of the cutting-edge technology associated with them.

The EU aims to provide policies and measures to effectively monitor and minimize the possibility of smuggling or money laundering through digital currency.

Hard to Stop People

The EU considers privacy coins to be a new level of hazard.

Regardless of its unintentional nature, privacy coins have grown in popularity for ransomware payments, illicit activities, and money laundering. The authorities are concerned about the coins’ anonymity because anonymity affects their investigations.

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The US sanction against Tornado Cash is the most well-known legislative tough approach to private, anonymous transactions.

The decentralized protocol was targeted by the U.S. Treasury following allegations of enabling malicious cyber activities. US citizens are forbidden to interact with the tool.

The increasing demand for cryptocurrencies and virtual currencies in recent years has left most regulatory authorities perplexed and made it difficult to provide a legal framework as well as a management strategy.

Governments’ concerns about a completely obscured ledger are substantially higher than those of other cryptocurrencies.

Privacy First

Privacy-focused coins, such as Monero and Zcash, which are built with a high emphasis on anonymity to avoid tracking, have grown in popularity and value.

Europol, the European Union’s law enforcement organization, issued a warning in 2018 over the popularity of Monero, Zcash, and Ethereum, exposing them to illegal activities.

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Cybercriminals that use ransomware began demanding ransom payments in these digital currencies, rather than bitcoin, as previously.

Monero, which was launched in 2014, works substantially differently than other cryptocurrencies. It encrypts the recipient’s address on the blockchain network and generates bogus addresses to conceal the sender’s true identity. It also has the capability of concealing the number of transactions.

While Monero is known for having strong privacy protection, its major competitor, Zcash, provides even stronger privacy protection.

Instead of establishing a bogus address to conceal the sender’s identity, Zcash encrypts the sender’s true address. This makes identifying the sender impossible by looking for correlation information in addresses used in a variety of transactions.

Privacy coins in crypto function as BitTorrent, which makes the possibility of cracking it down or the traceability merely symbolic.

Additionally, there are lots of open-source decentralized exchanges, which are nodes managed by individuals who are rewarded in cryptocurrency for ensuring the node’s continued operation.

Besides regulatory pressures, the privacy coins also face increasing refusal of support from exchanges. Privacy coins are indeed banned in some countries such as Japan and South Korea.

The power of the underlying techniques of the privacy coins not only challenges privacy violations but also makes it hard to crack down entirely.

As for now, it’s almost impossible to ban or taint privacy coins. But if the restrictions are imposed on users’ interaction with the coins, the privacy coin sector is obviously hit hard.

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Author: Nicholas Say


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